[Federal Register Volume 89, Number 3 (Thursday, January 4, 2024)]
[Rules and Regulations]
[Pages 590-695]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27997]



[[Page 589]]

Vol. 89

Thursday,

No. 3

January 4, 2024

Part III





 Federal Trade Commission





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16 CFR Part 463





Combating Auto Retail Scams Trade Regulation Rule; Final Rule

Federal Register / Vol. 89 , No. 3 / Thursday, January 4, 2024 / 
Rules and Regulations

[[Page 590]]


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FEDERAL TRADE COMMISSION

16 CFR Part 463

RIN 3084-AB72


Combating Auto Retail Scams Trade Regulation Rule

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is 
issuing this Combating Auto Retail Scams Trade Regulation Rule (``CARS 
Rule,'' ``Rule,'' or ``Final Rule'') and Statement of Basis and Purpose 
(``SBP'') related to the sale, financing, and leasing of covered motor 
vehicles by covered motor vehicle dealers. The Final Rule, among other 
things, prohibits motor vehicle dealers from making certain 
misrepresentations in the course of selling, leasing, or arranging 
financing for motor vehicles, requires accurate pricing disclosures in 
dealers' advertising and sales communications, requires dealers to 
obtain consumers' express, informed consent for charges, prohibits the 
sale of any add-on product or service that confers no benefit to the 
consumer, and requires dealers to keep records of certain 
advertisements and customer transactions.

DATES: This rule is effective July 30, 2024.

ADDRESSES: Copies of this document are available on the Commission's 
website, www.ftc.gov.

FOR FURTHER INFORMATION CONTACT: Daniel Dwyer or Sanya Shahrasbi, 
Division of Financial Practices, Bureau of Consumer Protection, Federal 
Trade Commission, 202-326-2957 (Dwyer), 202-326-2709 (Shahrasbi), 
<a href="/cdn-cgi/l/email-protection#5c38382b25392e1c3a283f723b332a"><span class="__cf_email__" data-cfemail="d7b3b3a0aeb2a597b1a3b4f9b0b8a1">[email protected]</span></a>, <a href="/cdn-cgi/l/email-protection#9ae9e9f2fbf2e8fbe9f8f3dafceef9b4fdf5ec"><span class="__cf_email__" data-cfemail="4635352e272e342735242f0620322568212930">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background
    A. Statutory Authority
    B. Commission Actions Following the Dodd-Frank Act and the 
Rulemaking Process
II. Motor Vehicle Financing and Leasing
    A. Overview of the Motor Vehicle Marketplace
    B. Deceptive and Unfair Practices in the Motor Vehicle 
Marketplace
    1. Bait-and-Switch Tactics
    2. Unlawful Practices Relating to Add-On Products or Services 
and Hidden Charges
    C. Law Enforcement and Other Responses
III. Section-by-Section Analysis
    A. Sec.  463.1: Authority
    B. Sec.  463.2: Definitions
    1. Overview
    2. Definition-by-Definition Analysis
    (a) Add-On or Add-On Product(s) or Service(s)
    (b) Add-On List
    (c) Cash Price Without Optional Add-Ons
    (d) Clearly and Conspicuously
    (e) Motor Vehicle (finalized as ```Covered Motor Vehicle' or 
`Vehicle' '')
    (f) Dealer or Motor Vehicle Dealer (finalized as ```Covered 
Motor Vehicle Dealer' or `Dealer' '')
    (g) Express, Informed Consent
    (h) GAP Agreement
    (l) Government Charges
    (j) Material or Materially
    (k) Offering Price
    C. Sec.  463.3: Prohibited Misrepresentations
    1. General Comments
    2. Paragraph-by-Paragraph Analysis of Sec.  463.3
    (a) The Costs or Terms of Purchasing, Financing, or Leasing a 
Vehicle
    (b) Any Costs, Limitation, Benefit, or Any Other Aspect of an 
Add-On Product or Service
    (c) Whether Terms Are, or Transaction Is, for Financing or a 
Lease
    (d) The Availability of Any Rebates or Discounts That Are 
Factored Into the Advertised Price but Not Available to All 
Consumers
    (e) The Availability of Vehicles at an Advertised Price
    (f) Whether Any Consumer Has Been or Will Be Preapproved or 
Guaranteed for Any Product, Service, or Term
    (g) Any Information on or About a Consumer's Application for 
Financing
    (h) When the Transaction Is Final or Binding on All Parties
    (i) Keeping Cash Down Payments or Trade-in Vehicles, Charging 
Fees, or Initiating Legal Process or Any Action If a Transaction Is 
Not Finalized or If the Consumer Does Not Wish To Engage in a 
Transaction
    (i) Keeping Cash Down Payments or Trade-in Vehicles, Charging 
Fees, or Initiating Legal Process or Any Action If a Transaction Is 
Not Finalized or If the Consumer Does Not Wish To Engage in a 
Transaction
    (j) Whether or When a Dealer Will Pay Off Some or All of the 
Financing or Lease on a Consumer's Trade-in Vehicle
    (k) Whether Consumer Reviews or Ratings Are Unbiased, 
Independent, or Ordinary Consumer Reviews or Ratings of the Dealer 
or the Dealer's Products or Services
    (l) Whether the Dealer or Any of the Dealer's Personnel or 
Products or Services Is or Was Affiliated With, Endorsed or Approved 
by, or Otherwise Associated With the United States Government or Any 
Federal, State, or Local Government Agency, Unit, or Department, 
Including the United States Department of Defense or Its Military 
Departments
    (m) Whether Consumers Have Won a Prize or Sweepstakes
    (n) Whether, or Under What Circumstances, a Vehicle May Be 
Moved, Including Across State Lines or Out of the Country
    (o) Whether, or Under What Circumstances, a Vehicle May Be 
Repossessed
    (p) Any of the Required Disclosures Identified in This Part
    D. Sec.  463.4: Disclosure Requirements
    1. Overview
    2. Paragraph-by-Paragraph Analysis of Sec.  463.4
    (a) Offering Price
    (b) Add-On List
    (c) Add-Ons Not Required
    (d) Total of Payments and Consideration for a Financed or Lease 
Transaction
    (e) Monthly Payments Comparison
    E. Sec.  463.5: Dealer Charges for Add-Ons and Other Items
    1. Overview
    2. Paragraph-by-Paragraph Analysis of Sec.  463.5
    (a) Add-Ons That Provide No Benefit
    (b) Undisclosed or Unselected Add-Ons
    (c) Any Item Without Express, Informed Consent
    F. Sec.  463.6: Recordkeeping
    G. Sec.  463.7: Waiver Not Permitted
    H. Sec.  463.8: Severability
    I. Sec.  463.9: Relation to State Laws
IV. Effective Date
V. Paperwork Reduction Act
    A. Add-On List Disclosures
    B. Disclosures Relating to Cash Price Without Optional Add-Ons
    C. Prohibited Misrepresentations and Required Disclosures
    D. Recordkeeping
    E. Capital and Other Non-Labor Costs
    1. Disclosures
    2. Recordkeeping
VI. Regulatory Flexibility Act
    A. Significant Impact Analysis
    1. Comments on Significant Impact
    2. Certification of the Final Rule
    (a) Industry Averages
    (b) Dealer Size Based on the Number of Employees
    B. Initial and Final Regulatory Flexibility Analysis
    1. Comments on the Initial Regulatory Flexibility Analysis
    (a) Description of the Reasons Why Action by the Agency Is Being 
Considered
    (b) Succinct Statement of the Objectives of, and Legal Basis 
for, the Proposed Rule
    (c) Description of and, Where Feasible, Estimate of the Number 
of Small Entities to Which the Proposed Rule Will Apply
    (d) Description of the Projected Reporting, Recordkeeping, and 
Other Compliance Requirements of the Proposed Rule
    (e) Duplicative, Overlapping, or Conflicting Federal Rules
    (f) Description of Any Significant Alternatives to the Proposed 
Rule Which Accomplish the Stated Objectives of Applicable Statutes 
and Which Minimize Any Significant Economic Impact of the Proposed 
Rule on Small Entities
    2. Final Regulatory Flexibility Analysis
    (a) Statement of the Need for, and Objectives of, the Rule
    (b) Issues Raised by Comments, Including Comments by the Chief 
Counsel for Advocacy of the SBA, the Commission's Assessment and 
Response, and Any Changes Made as a Result

[[Page 591]]

    (c) Description and Estimate of the Number of Small Entities to 
Which the Final Rule Will Apply or an Explanation of Why No Such 
Estimate Is Available
    (d) Description of the Projected Reporting, Recordkeeping, and 
Other Compliance Requirements
    (e) Description of the Steps the Commission Has Taken To 
Minimize the Significant Economic Impact on Small Entities 
Consistent With the Stated Objectives of Applicable Statutes
VII. Final Regulatory Analysis Under Section 22 of the FTC Act
    A. Introduction
    B. Estimated Benefits of Final Rule
    1. Consumer Time Savings When Shopping for Motor Vehicles
    2. Reductions in Deadweight Loss
    3. Framework
    4. Estimation
    5. Benefits Related to More Transparent Negotiation
    C. Estimated Costs of Final Rule
    1. Prohibited Misrepresentations
    2. Required Disclosure of Offering Price in Advertisements and 
in Response to Inquiry
    3. Disclosure of Add-On List and Associated Prices
    4. Required Disclosure of Total of Payments for Financing/
Leasing Transactions
    5. Prohibition on Charging for Add-Ons that Provide No Benefit
    6. Requirement to Obtain Express, Informed Consent Before Any 
Charges
    7. Recordkeeping
    D. Other Impacts of Final Rule
    E. Conclusion
    F. Appendix: Derivation of Deadweight Loss Reduction
    G. Appendix: Uncertainty Analysis
VIII. Other Matters

I. Background

A. Statutory Authority

    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(``Dodd-Frank Act'') was signed into law in 2010.\1\ Section 1029 of 
the Dodd-Frank Act authorizes the FTC to prescribe rules with respect 
to unfair or deceptive acts or practices by motor vehicle dealers.\2\ 
The FTC is authorized to do so under the FTC Act and in accordance with 
section 553 of the Administrative Procedure Act (``APA'').\3\ The grant 
of APA rulemaking authority set forth in section 1029 of the Dodd-Frank 
Act became effective as of July 21, 2011--the designated ``transfer 
date'' established by the Treasury Department.\4\
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
    \2\ 12 U.S.C. 5519(d). See 12 U.S.C. 5519(f)(1) and (2) for 
definitions of the terms ``motor vehicle'' and ``motor vehicle 
dealer'' under section 1029 of the Dodd-Frank Act, respectively.
    \3\ See 12 U.S.C. 5519(a) (discussing the authority over ``motor 
vehicle dealer[s] that [are] predominantly engaged in the sale and 
servicing of motor vehicles, the leasing and servicing of motor 
vehicles, or both''); 12 U.S.C. 5519(d) (``Notwithstanding section 
57a of title 15, the Federal Trade Commission is authorized to 
prescribe rules under sections 45 and 57a(a)(1)(B) of title 15[ ] in 
accordance with section 553 of title 5, with respect to a person 
described in subsection (a).''); 5 U.S.C. 553. Because the 
Commission has authority to promulgate this Rule in accordance with 
the APA, it is not required to include a statement as to the 
prevalence of the acts or practices treated by the Rule under 
section 18(d) of the FTC Act. Compare 12 U.S.C. 5519(d) and (a) 
(providing the FTC with APA rulemaking authority for purposes of 
section 1029 of the Dodd-Frank Act), with 15 U.S.C. 57a(b)(3) 
(requiring a statement as to prevalence for certain rulemaking 
proceedings by the Commission under non-APA procedures), and 15 
U.S.C. 57a(b)(1) (establishing that certain rulemaking proceedings 
by the Commission under non-APA procedures are subject to 
requirements in addition to those under the APA).
    \4\ See 12 U.S.C. 5411(a).
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B. Commission Actions Following the Dodd-Frank Act and the Rulemaking 
Process

    Following enactment of the Dodd-Frank Act, the Commission published 
in the Federal Register a notice discussing its authority to prescribe 
rules with respect to unfair or deceptive acts or practices by motor 
vehicle dealers and announcing that it would be hosting a series of 
public roundtables to explore consumer protection issues pertaining to 
motor vehicle sales and leasing, including what consumer protection 
issues, if any, exist that could be addressed through a possible 
rulemaking.\5\ The Commission sought participation from regulators, 
consumer advocates, industry participants, and other interested parties 
and ultimately held three such public roundtables.\6\
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    \5\ 76 FR 14014, 14015 (Mar. 15, 2011).
    \6\ See Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing 
& Leasing Motor Vehicles'' (Apr. 12, 2011), https://www.ftc.gov/news-events/events/2011/04/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in Detroit, 
Michigan); Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing & 
Leasing Motor Vehicles'' (Aug. 2, 2011), https://www.ftc.gov/news-events/events/2011/08/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in San Antonio, 
Texas); Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing & 
Leasing Motor Vehicles'' (Nov. 17, 2011), https://www.ftc.gov/news-events/events/2011/11/road-ahead-selling-financing-leasing-motor-vehicles (providing materials from roundtable in Washington, 
District of Columbia).
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    The Commission subsequently focused on enforcement and business 
guidance in the motor vehicle dealer marketplace. As discussed in SBP 
II.C,\7\ however, certain unfair and deceptive acts or practices have 
persisted, despite more than a decade of enforcement and education. 
Accordingly, on June 23, 2022, the Commission announced a notice of 
proposed rulemaking (``NPRM'') addressing unfair or deceptive acts or 
practices by motor vehicle dealers.\8\ That notice was published in the 
Federal Register on July 13, 2022.\9\ The NPRM, among other things, 
proposed to (i) prohibit motor vehicle dealers from making certain 
misrepresentations, (ii) require accurate pricing disclosures, (iii) 
prohibit the sale of any add-on product or service that confers no 
benefit to the consumer, (iv) require express, informed consent for 
add-ons and other charges, and (v) impose certain recordkeeping 
requirements. The comment period for the NPRM closed on September 12, 
2022.
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    \7\ As used herein, references to the ``Statement of Basis and 
Purpose'' or ``SBP'' refer to the portions of this document that 
precede the regulatory text of the Final Rule. References to the 
``Rule,'' ``Final Rule,'' or ``CARS Rule'' refer to the text in part 
463--Combating Auto Retail Scams (``CARS'') Trade Regulation Rule. 
Because the Final Rule is narrower than the proposed Motor Vehicle 
Dealers Trade Regulation Rule in the NPRM, the Commission has 
modified the Rule title to reflect the more limited scope.
    \8\ See Press Release, Fed. Trade Comm'n, ``FTC Proposes Rule to 
Ban Junk Fees, Bait-and-Switch Tactics Plaguing Car Buyers'' (June 
23, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-proposes-rule-ban-junk-fees-bait-switch-tactics-plaguing-car-buyers.
    \9\ See Fed. Trade Comm'n, Notice of Proposed Rulemaking, Motor 
Vehicle Dealers Trade Regulation Rule, 87 FR 42012 (released June 
23, 2022; published July 13, 2022) [hereinafter NPRM], https://www.govinfo.gov/content/pkg/FR-2022-07-13/pdf/2022-14214.pdf.
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    In response to the NPRM and proposed rule, the Commission received 
more than 27,000 comments from stakeholders representing a wide range 
of viewpoints.\10\ These stakeholders included numerous individual 
consumers who described deceptive practices during recent car purchases 
and many who discussed current or former military service and deceptive 
and predatory practices common near military installations.\11\ 
Commenters

[[Page 592]]

also included dealerships and their employees, industry groups, 
consumer and community groups, and Federal and State lawmakers and law 
enforcement agencies. Many commenters, such as consumers, some dealers 
and dealer employees, consumer groups, and lawmakers and enforcers, 
were supportive of the proposed rule in whole or in part. Many of these 
commenters also urged the FTC to include additional protections for 
consumers and law-abiding businesses, while others, such as industry 
groups, dealers, and dealer employees, asked questions or criticized 
the proposal.\12\ These comments and responses to comments are 
discussed primarily in the discussion of the Final Rule in SBP III.
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    \10\ The Commission received 27,349 comment submissions filed 
online in response to its NPRM. See Gen. Servs. Admin., Dkt. No. 
FTC-2022-0046, Proposed Rule, Motor Vehicle Dealers Trade Regulation 
Rule (July 13, 2022), https://www.regulations.gov/document/FTC-2022-0046-0001 (noting comments received). To facilitate public access, 
over 11,000 such comments have been posted publicly on 
Regulations.gov at https://www.regulations.gov/document/FTC-2022-0046-0001/comment (noting posted comments). As explained at 
Regulations.gov, agencies may choose to redact or withhold certain 
submissions (or portions thereof) such as those containing private 
or proprietary information, inappropriate language, or duplicate/
near duplicate examples of a mass-mail campaign. See Gen. Servs. 
Admin., Regulations.gov Frequently Asked Questions, Find Dockets, 
Documents, and Comments FAQs, ``How are comments counted and posted 
to Regulations.gov?,'' https://www.regulations.gov/faq?anchor=downloadingdata (last visited Dec. 5, 2023). The 
Commission has considered all timely and responsive public comments 
it received in response to its NPRM.
    \11\ See, e.g., Individual commenter, Doc. No. FTC-2022-0046-
4648 (``As a young Marine stationed in a military town I was taken 
advantage of by a dealership when purchasing my first car. It set me 
back financially for years. I know of many young military people who 
purchased vehicle[ ]s and we[ ]re instantly so far upside down after 
leaving the dealership with thousands of dollars in add on junk 
charges . . . .''); Individual commenter, Doc. No. FTC-2022-0046-
0542 (``As a former member of the Military, the amount of scams and 
horror stories I have heard regarding young service members buying 
cars is absurd. . . . Someone shouldn't have to do hours of research 
on how to buy a car so they don't get taken advantage of.''); 
Individual commenter, Doc. No. FTC-2022-0046-0637 (``As a small 
business owner and active duty military member I have played the 
role of both a buyer, toiling for hours to just reach fair deals on 
vehicles, as well as that of an advocate for my Sailors who have 
been preyed upon by local dealerships. Nowhere else in our society 
do so many average citizens have to mentally prepare for a battle 
over fair pricing and treatment for something that is realistically 
a modern necessity.''); Individual commenter, Doc. No. FTC-2022-
0046-9840 (``I can't list the number of times I have either seen, or 
have stepped in a situation, where car dealers have either attempted 
to take, or have successfully taken, advantage of a young military 
member or their family by baiting and switching when it came to the 
price of a car, or stated that the price was one amount, only to be 
charged, and over-charged a higher amount. These dealers have even 
attempted to pull unethical tricks on me and my wife, even after 
they found out that I was a military member, a combat veteran, that 
was serving this great nation.''); Individual commenter, Doc. No. 
FTC-2022-0046-0845 (``Predatory practices like [bait-and-switch 
pricing] are common near military installations . . . .'').
    \12\ Industry commenters claimed that many of the areas covered 
by the proposed rule are already addressed in industry guidance. The 
Commission notes that, although industry guidance can provide 
helpful information to dealers, dealers who choose not to follow 
such guidance, or who engage in deceptive or unfair practices, 
subject their customers to significant harm. The Rule addresses such 
practices, thus protecting consumers and law-abiding dealers.
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    The Commission notes that it has undertaken careful review and 
consideration of each of the comments it received in response to its 
NPRM. The Commission has dedicated the majority of its section-by-
section analysis to descriptions of, and responses to, comments or 
portions thereof that were critical of the Commission's proposal or 
that urged the Commission to adopt additional requirements. Thus, to 
ensure that this document also reflects the many comments in the public 
record from stakeholders who supported the proposal as is, the 
Commission has excerpted a number of such comments in portions of its 
SBP.

II. Motor Vehicle Financing and Leasing

A. Overview of the Motor Vehicle Marketplace

    For many consumers, buying or leasing a motor vehicle is essential, 
expensive, and time-consuming.\13\ Americans rely on their vehicles for 
work, school, childcare, groceries, medical visits, and many other 
important tasks in their daily lives.\14\ These vehicles have become 
increasingly costly: the average price of a new vehicle sold at a new 
car dealership in 2022 was more than $46,000,\15\ while the average 
price of a used vehicle sold at such dealerships was more than 
$30,000.\16\ By the second quarter of 2023, the average monthly payment 
for used cars reached $533, and the average monthly payment for new 
cars reached $741--both record highs.\17\ Vehicles are now many 
consumers' largest expense--on a par with housing, child care and food, 
and accounting for 16% of the median annual household income before 
taxes.\18\ In 2022 alone, Americans spent more than $720 billion on 
motor vehicles and vehicle parts.\19\
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    \13\ Unless otherwise indicated, the terms ``auto,'' 
``automobile,'' ``car,'' ``motor vehicle,'' and ``vehicle,'' as used 
in this SBP and the Commission's final regulatory analysis, refer to 
``Covered Motor Vehicle'' as defined in this part.
    \14\ During 2017 to 2022, an average of 91% of American workers 
who did not work from home drove to work. See U.S. Census Bureau, 
``American Community Survey: Means of Transportation to Work by 
Selected Characteristics, 2022: ACS 1-Year Estimates Subject 
Tables'' (2023), https://data.census.gov/table?q=Commuting&tid=ACSST1Y2022.S0802 (reporting 110,245,368 
workers 16 years and over who drove alone to work in a car, truck, 
or van, and 13,881,067 workers 16 years and over who drove by 
carpool to work in a car, truck or van, together accounting for 91% 
of the total of 136,196,004 workers 16 years and over who did not 
work from home); U.S. Census Bureau, ``American Community Survey: 
Means of Transportation to Work by Selected Characteristics, 2021: 
2017-2021 ACS 5-Year Estimates Subject Tables'' (2022), https://data.census.gov/table?q=Commuting&tid=ACSST5Y2021.S0802 (reporting 
113,724,271 workers 16 years and over who drove alone to work in a 
car, truck, or van, and 13,340,838 workers 16 years and over who 
drove by carpool to work in a car, truck or van, together accounting 
for 91% of the total of 140,223,271 workers 16 years and over who 
did not work from home).
    \15\ Nat'l Auto. Dealers Ass'n, ``NADA Data 2022'' 7, https://www.nada.org/media/4695/download?inline (noting average retail 
selling price of $46,287 for new vehicles sold by dealerships in 
2022).
    \16\ Id. at 10 (noting average retail selling price of $30,736 
for used vehicles sold by new-vehicle dealerships in 2022).
    \17\ Lydia DePillis, ``How the Costs of Car Ownership Add Up,'' 
N.Y. Times (Oct. 6, 2023), https://www.nytimes.com/interactive/2023/10/07/business/car-ownership-costs.html (citing average monthly 
payment figures from TransUnion).
    \18\ Id. (citing data from AAA and the U.S. Census Bureau).
    \19\ Bureau of Econ. Analysis, ``National Data: National Income 
and Product Accounts, Personal Consumption Expenditures by Major 
Type of Product'' tbl. 2.3.5, https://apps.bea.gov/iTable/?reqid=19&step=2&isuri=1&categories=survey#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDNdLCJkYXRhIjpbWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJOSVBBX1RhYmxlX0xpc3QiLCI2NSJdXX0= (last revised July 27, 2023) (listing 
estimated annual expenditure rates of between $713.1 billion and 
$737.1 billion in 2022).
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    Given these costs, many consumers who purchase a motor vehicle rely 
on financing to complete their purchases. According to public reports, 
81% of new motor vehicle purchases, and nearly 35% of used vehicle 
purchases, are financed.\20\ By the first quarter of 2023, Americans 
had more than 107 million outstanding auto financing accounts and owed 
more than $1.56 trillion thereon,\21\ making auto finance the third-
largest source of debt for U.S. consumers, and the second-largest for 
U.S. consumers ages 40 and over.\22\ Servicemembers have an average of 
twice as much auto debt as civilians--particularly young 
servicemembers, who generally require vehicles for transportation while 
living on military bases.\23\ By the age of 24, around 20

[[Page 593]]

percent of young servicemembers have at least $20,000 in auto debt, 
which equates to nearly two-thirds of an enlisted soldier's typical 
base salary at that age.\24\
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    \20\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of 
the Automotive Finance Market Q4 2020'' 5, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf 
(on file with the Commission).
    \21\ Fed. Rsrv. Bank of N.Y., ``Quarterly Report on Household 
Debt and Credit, 2023: Q1'' 3-4 (May 2023), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023Q1; Fed. Rsrv. Bank of N.Y., ``Data Underlying Report'' 
on ``Page 3 Data'' and ``Page 4 Data'' tabs, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2023Q1 (last visited Dec. 5, 2023) (listing number 
of open ``Auto Loan'' accounts and total outstanding balance in such 
accounts).
    \22\ Fed. Rsrv. Bank of N.Y., ``Quarterly Report on Household 
Debt and Credit, 2023: Q1'' 3, 21 (May 2023), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2023Q1; Fed. Rsrv. Bank of N.Y., ``Data Underlying Report'' 
on ``Page 3 Data'' and ``Page 21 Data'' tabs, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/HHD_C_Report_2023Q1 (last visited Dec. 5, 2023) (listing total 
``Auto Loan'' debt balance compared to other product type 
categories).
    \23\ See Consumer Fin. Prot. Bureau, ``Financially Fit? 
Comparing the Credit Records of Young Servicemembers and Civilians'' 
27 (July 2020), https://files.consumerfinance.gov/f/documents/cfpb_financially-fit_credit-young-servicemembers-civilians_report_2020-07.pdf.
    \24\ See Consumer Fin. Prot. Bureau, ``Protecting Servicemembers 
from Costly Auto Loans and Wrongful Repossessions'' (July 18, 2022), 
https://www.consumerfinance.gov/about-us/blog/protecting-servicemembers-from-costly-auto-loans-and-wrongful-repossessions/.
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    In addition to the expense, the process of buying or leasing a 
vehicle is often time-consuming and arduous. It can take several hours 
or days to finalize a transaction,\25\ on top of the hours it can take, 
particularly in rural areas, to drive to a dealership.\26\ Consumers 
may need to take time off work or arrange childcare, and families with 
a single vehicle may be forced to delay other important appointments 
due to the length of the vehicle-buying or -leasing process.
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    \25\ Mary W. Sullivan, Matthew T. Jones & Carole L. Reynolds, 
Fed. Trade Comm'n, ``The Auto Buyer Study: Lessons from In-Depth 
Consumer Interviews and Related Research'' 15 (July 2020) 
[hereinafter Auto Buyer Study], https://www.ftc.gov/system/files/documents/reports/auto-buyer-study-lessons-depth-consumer-interviews-related-research/bcpreportsautobuyerstudy.pdf (noting 
that the purchase transactions in the FTC's qualitative study often 
took 5 hours or more to complete, with some extending over several 
days); Cf. Cox Auto., ``2020 Cox Automotive Car Buyer Journey'' 6 
(2020) [hereinafter 2020 Cox Automotive Car Buyer Journey], https://b2b.autotrader.com/app/uploads/2020-Car-Buyer-Journey-Study.pdf 
(reporting average consumer time spent shopping for a vehicle at 14 
hours, 53 minutes); Cox Auto., ``2022 Car Buyer Journey: Top Trends 
Edition'' 6 (2023) [hereinafter 2022 Car Buyer Journey], https://www.coxautoinc.com/wp-content/uploads/2023/01/2022-Car-Buyer-Journey-Top-Trends.pdf (reporting average consumer time spent 
shopping for a vehicle at 14 hours, 39 minutes).
    \26\ For example, consumers have complained about going to a 
dealership based on an offer that the dealer refuses to honor only 
after they have spent hours driving there and additional time on the 
lot. See, e.g., Complaint ]] 23-26, Fed. Trade Comm'n v. N. Am. 
Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022) 
(alleging that many consumers drive hours to dealerships based on 
the advertised prices; that test-driving and selecting a vehicle, 
and negotiating the price and financing terms, is an often hours-
long process; and that, after this time, dealers falsely told 
consumers that add-on products or packages were required to purchase 
or finance the vehicle, even though they were not included in the 
low prices advertised or disclosed to consumers who called to 
confirm prices).
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    Most consumers--approximately 70%--finance vehicle purchases 
through a motor vehicle dealer,\27\ using what is known as dealer-
provided ``indirect'' financing.\28\ This financing is typically 
offered through dealers' financing and insurance (``F&I'') offices, 
which may also offer leasing and add-on products or services. In the 
dealer-provided financing scenario, the dealer collects financial 
information about the consumer and forwards that information to 
prospective motor vehicle financing entities. These financing entities 
evaluate this information and, in the process, determine whether, and 
on what terms, to provide credit.\29\ These terms include the ``buy 
rate'': a risk-based finance charge that reflects the interest rate at 
which the entity will finance the deal.\30\ Dealers often add a finance 
charge called a ``dealer reserve'' or ``markup'' to the buy rate.\31\ 
Unlike the buy rate, the markup is not based on the underwriting risk 
or credit characteristics of the applicant, and dealers retain the 
markup as profit.\32\ New vehicle dealers average a gross profit of 
about $2,444 per vehicle,\33\ more than half of which comes from the 
dealers' F&I offices. Independent used vehicle dealers averaged a gross 
profit of more than $6,000 per vehicle, as of 2019.\34\ While some used 
vehicle dealerships do not have a separate F&I office, more than half 
of such dealerships sell add-on products.\35\
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    \27\ Unless otherwise indicated, the terms ``dealer,'' 
``dealership,'' and ``motor vehicle dealer'' as used in this SBP and 
the Commission's final regulatory analysis refer to `` `Covered 
Motor Vehicle Dealer' or `Dealer' '' as defined in this part.
    \28\ See Nat'l Auto. Dealers Ass'n, ``Dealer-Assisted Financing 
Benefits Consumers,'' https://www.nada.org/autofinance/[https://web.archive.org/web/20220416131718/https://www.nada.org/autofinance/
] (Apr. 16, 2022) (noting that 7 out of 10 consumers finance through 
their dealership). This is also known as ``dealer financing,'' 
because consumers obtain financing through the dealer that partners 
with other entities in the financing process.
    \29\ Dealers often originate the contract governing the 
extension of retail credit or retail leases and then sell, or 
otherwise assign, these contracts to unaffiliated third-party 
finance or leasing sources, including such third parties the dealer 
may have contacted in the course of arranging dealer-provided 
``indirect'' financing. See Consumer Fin. Prot. Bureau, ``Automobile 
Finance Examination Procedures'' 3 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf.
    \30\ See Nat'l Auto. Dealers Ass'n, Nat'l Ass'n of Minority 
Auto. Dealers & Am. Int'l Auto. Dealers Ass'n, ``Fair Credit 
Compliance Policy & Program'' 2 (2015), https://www.nada.org/media/4558/download?inline. (defining ``buy rate'' as ``the rate at which 
the finance source will purchase the credit contract from the 
dealer'').
    \31\ See, e.g., id. at 1 n.4 & accompanying text.
    \32\ Id. (describing this as the amount dealers earn for 
arranging financing, measured as the difference between the 
consumer's annual percentage rate (``APR'') and the wholesale ``buy 
rate'' at which a finance source buys the finance contract from the 
dealer, and noting that finance sources typically permit dealers to 
retain the dealer participation).
    \33\ Nat'l Auto. Dealers Ass'n, ``Average Dealership Profile'' 1 
(2020), https://www.nada.org/media/4136/download?attachment[http://web.archive.org/web/20220623204158/https://www.nada.org/media/4136/download?attachment] (June 23, 2022).
    \34\ Nat'l Indep. Auto. Dealers Ass'n, ``NIADA Used Car Industry 
Report 2020'' 21 (2020).
    \35\ Id. at 8, 10.
---------------------------------------------------------------------------

    Six to eight percent of financed vehicle purchases use what is 
called ``buy here, pay here'' dealers.\36\ In this scenario, consumers 
typically borrow from, and make their payments directly to, the 
dealership.
---------------------------------------------------------------------------

    \36\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of 
the Automotive Finance Market Q2 2020'' 8 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-q2-safm-final.pdf [http://web.archive.org/web/20201106002015/https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-q2-safm-final.pdf] (Mar. 6, 2023).
---------------------------------------------------------------------------

    The remainder of financed vehicle transactions use what is commonly 
referred to as ``direct'' financing, provided by a credit union, bank, 
or other financing entity.\37\ In this scenario, consumers typically 
receive an interest rate quote from the financing entity prior to 
arriving at a dealership to purchase a vehicle, and use the financing 
to pay for their chosen vehicle.\38\ Dealerships do not profit on the 
financing portion of the vehicle sale transaction when a consumer 
arranges financing directly.
---------------------------------------------------------------------------

    \37\ Consumer Fin. Prot. Bureau, ``Automobile Finance 
Examination Procedures'' 4 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf.
    \38\ Consumer Fin. Prot. Bureau, ``Consumer Voices on Automobile 
Financing'' 5 (June 2016), https://files.consumerfinance.gov/f/documents/201606_cfpb_consumer-voices-on-automobile-financing.pdf.
---------------------------------------------------------------------------

    Finally, consumers may choose to lease a vehicle from a dealership 
rather than purchase one. In this scenario, consumers may drive a 
vehicle for a set period of time--typically around three years \39\--
and for a certain maximum number of miles--typically 10,000-15,000 
miles per year--in exchange for an upfront payment, a monthly payment, 
and fees before, during, and at the end of the lease, including for 
excess wear and usage over the mileage limit.\40\ When consumers lease 
a vehicle, they do not own it, and they must return the vehicle when 
the lease expires, though they may have the option to purchase

[[Page 594]]

the vehicle at the end of the lease period. Nearly 27% of new vehicles 
are leased, as are just over 8% of used vehicles.\41\
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    \39\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of 
the Automotive Finance Market Q4 2020'' 26 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf [http://web.archive.org/web/20210311174922/https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf] (Mar. 6, 2023).
    \40\ See Fed. Trade Comm'n, ``Financing or Leasing a Car,'' 
https://www.consumer.ftc.gov/articles/0056-financing-or-leasing-car 
(last visited Dec. 5, 2023) (``The annual mileage limit in most 
standard leases is 15,000 or less.''); Consumer Fin. Prot. Bureau, 
``What should I know about the differences between leasing and 
buying a vehicle?,'' https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-the-differences-between-leasing-and-buying-a-vehicle-en-815/ (last visited Aug. 24, 2023) (``Most leases restrict 
your mileage to 10,000-15,000 miles per year.'').
    \41\ Melinda Zabritski, Experian Info. Sols., Inc., ``State of 
the Automotive Finance Market Q4 2020'' 5 (2020), https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf [https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf] (Mar. 6, 
2023).
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B. Deceptive and Unfair Practices in the Motor Vehicle Marketplace

    Section 5 of the Federal Trade Commission Act (``FTC Act''), as 
amended (15 U.S.C. 45), authorizes the FTC to address deceptive or 
unfair acts or practices in or affecting commerce, including in the 
motor vehicle marketplace.
    An act or practice is deceptive if there is a representation, 
omission, or other practice that is likely to mislead consumers acting 
reasonably under the circumstances and is material to consumers--that 
is, it is likely to affect consumers' conduct or decisions with regard 
to a product or service.\42\ Deceptive conduct can involve omission of 
material information, the disclosure of which is necessary to prevent 
the claim, practice, or sale from being misleading.\43\
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    \42\ See Fed. Trade Comm'n, ``FTC Policy Statement on 
Deception'' 2, 5, 103 F.T.C. 174 (1984) [hereinafter FTC Policy 
Statement on Deception] (appended to Cliffdale Assocs., Inc., 103 
F.T.C. 110, 183 (1984)), https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
    \43\ Id.
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    An act or practice is considered unfair under section 5 of the FTC 
Act if: (1) it causes, or is likely to cause, substantial injury to 
consumers; (2) the injury is not reasonably avoidable by consumers; and 
(3) the injury is not outweighed by countervailing benefits to 
consumers or to competition.\44\
---------------------------------------------------------------------------

    \44\ 15 U.S.C. 45(n).
---------------------------------------------------------------------------

    In each of the past four years, the FTC received more than 100,000 
complaints regarding motor vehicle sales, financing, service and 
warranties, and rentals and leasing.\45\ This industry is also 
consistently at or near the top of private sources of consumer 
complaints.\46\ Many of these complaints concerned deceptive or unfair 
acts or practices affecting U.S. consumers. Complaints about motor 
vehicle transactions are regularly in the top ten complaint categories 
tracked by the FTC.\47\ For military consumers as well, auto-related 
complaints are among the top 10 complaint categories outside of 
identity theft.\48\
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    \45\ See, e.g., Fed. Trade Comm'n, ``Consumer Sentinel Network 
Data Book 2022'' app. B3 at 85 (Feb. 2023) [hereinafter Consumer 
Sentinel Network Data Book 2022], https://www.ftc.gov/system/files/ftc_gov/pdf/CSN-Data-Book-2022.pdf (reporting complaints about new 
and used motor vehicle sales, financing, service & warranties, and 
rentals & leasing, collectively, of more than 100,000 in 2020, 2021, 
and 2022); Fed. Trade Comm'n, ``Consumer Sentinel Network Data Book 
2021'' app. B3 at 85 (Feb. 2022) [hereinafter Consumer Sentinel 
Network Data Book 2021], https://www.ftc.gov/system/files/ftc_gov/pdf/CSN%20Annual%20Data%20Book%202021%20Final%20PDF.pdf (reporting 
complaints about new and used motor vehicle sales, financing, 
service & warranties, and rentals & leasing, collectively, of more 
than 100,000 in 2019, 2020, and 2021).
    \46\ According to commenters, complaints to the Better Business 
Bureau about new and used auto dealers, when combined, have been 
either the first or second highest regarding any industry in the 
U.S. for the past twenty years. See Comment of Nat'l Consumer L. 
Ctr. et al., Doc. No. FTC-2022-0046-7607 at ii; see also Better Bus. 
Bureau, ``BBB Complaint and Inquiry Statistics,'' https://www.bbb.org/all/bbb-complaint-statistics (last visited Dec. 5, 2023) 
(listing complaint statistics from 2010 through 2022, sorted by 
industry). In addition, for the past seven years annual surveys of 
State and local consumer protection agencies have reported that 
auto-related complaints were the top complaint received from 
consumers. See Comment of Nat'l Consumer L. Ctr. et al., Doc. No. 
FTC-2022-0046-7607 at 13; Consumer Fed'n of Am., ``2022 Consumer 
Complaint Survey Report'' 4-5 (May 2023), https://consumerfed.org/wp-content/uploads/2023/05/2022-Consumer-Complaint-Survey-Report.pdf 
(``For the seventh year in a row, auto sales, leases and repairs are 
the #1 complaint category. Consumers filed complaints about add-on 
products and services, bait and switch pricing, and mechanical 
condition issues.'').
    \47\ See Consumer Sentinel Network Data Book 2021, supra note 
45, at 8 (listing vehicle-related complaints as the seventh most 
common report category, outside of identity theft, in 2021); 
Consumer Sentinel Network Data Book 2022, supra note 45, at 8 
(listing motor vehicle-related complaints as the fifth most common 
report category, outside of identity theft, in 2022).
    \48\ See Consumer Sentinel Network Data Book 2021, supra note 
45, at 18 (listing vehicle-related complaints as the eighth most 
common complaint category for military consumers, outside of 
identity theft categories, in 2021); Consumer Sentinel Network Data 
Book 2022, supra note 45, at 18 (listing vehicle-related complaints 
as the ninth most common complaint category for military consumers, 
outside of identity theft categories, in 2022).
---------------------------------------------------------------------------

    Moreover, law enforcement experience shows that complaints are just 
the tip of the iceberg.\49\ The Commission's recent enforcement action 
against a large, multistate dealership group is illustrative of this 
point in the motor vehicle marketplace: in that matter, the Commission 
received 391 complaints--about add-ons and other issues--over a 
several-month period prior to filing a complaint against the thirteenth 
largest dealership group in the country by revenue as of 2020.\50\ 
However, in a survey of the dealer's customers over the same time 
period, 83% of respondents--or at least 16,848 customers--indicated 
they were subject to the dealer's unlawful practices related to add-ons 
alone.\51\
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    \49\ See, e.g., United States v. Brien, 617 F.2d 299, 308 (1st 
Cir. 1980); United States v. Offs. Known as 50 State Distrib. Co., 
708 F.2d 1371, 1374-75 (9th Cir. 1983); Keith B. Anderson, Fed. 
Trade Comm'n, ``Consumer Fraud in the United States: An FTC Survey'' 
80 (2004), https://www.ftc.gov/sites/default/files/documents/reports/consumer-fraud-united-states-ftc-survey/040805confraudrpt.pdf (staff report noting consumers who reported 
they were victims of fraud complained to an official source only 8.4 
percent of the time, filing complaints with the BBB in 3.5 percent 
of incidents and to a Federal agency, including the FTC, in only 1.4 
percent of cases).
    \50\ See Complaint, Fed. Trade Comm'n v. N. Am. Auto. Servs., 
Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022); see also 
WardsAuto, ``WardsAuto 2020 Megadealer 100,'' https://www.wardsauto.com/dealers/wardsauto-2020-megadealer-100-industry-force (last visited Dec. 5, 2023) (listing Napleton Automotive Group 
as the 13th-ranked dealership group by total revenue).
    \51\ Complaint ] 27, Fed. Trade Comm'n v. N. Am. Auto. Servs., 
Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022) (alleging that 
defendants buried charges for add-ons in voluminous paperwork, 
making them difficult to detect); see Press Release, Fed. Trade 
Comm'n, ``FTC Returns Additional $857,000 To Consumers Harmed by 
Napleton Auto's Junk Fees and Discriminatory Practices'' (Nov. 20, 
2023), https://www.ftc.gov/news-events/news/press-releases/2023/11/ftc-returns-additional-857000-consumers-harmed-napleton-autos-junk-fees-discriminatory-practices.
---------------------------------------------------------------------------

    Similarly, in other contexts where companies were charged with 
making misrepresentations or engaging in misconduct regarding add-on 
products, information obtained after filing has shown widespread harm 
far beyond the initial consumer complaint volumes reported prior to 
filing.\52\
---------------------------------------------------------------------------

    \52\ For example, in a recent action involving deceptive pre-
approval claims, the FTC had received roughly 30 complaints about 
the company's pre-approval conduct in the five-year period prior to 
announcing its action. But in the five months following announcement 
of the action, more than 900 additional consumers came forward with 
complaints about the conduct. See Press Release, Fed. Trade Comm'n, 
``FTC Announces Claims Process for Consumers Harmed by Credit Karma 
`Pre-Approved' Offers for Which They Were Denied'' (Dec. 5, 2023), 
https://www.ftc.gov/news-events/news/press-releases/2023/12/ftc-announces-claims-process-consumers-harmed-credit-karma-pre-approved-offers-which-they-were (``[W]ithin five months of that announcement, 
the agency received nearly 900 more such complaints'').
---------------------------------------------------------------------------

    As examined in greater detail in the paragraphs that follow, 
consumers in the motor vehicle marketplace are confronted with chronic 
deceptive or unfair practices, including bait-and-switch tactics and 
hidden charges.\53\
---------------------------------------------------------------------------

    \53\ While other issues exist in the motor vehicle sales, 
financing, and leasing space, including issues involving 
discrimination, financing application falsification, data privacy 
and security, and yo-yo financing, this Rule's core focus is on 
misrepresentations and add-on and pricing practices.
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1. Bait-and-Switch Tactics
    Advertisements for motor vehicles are often consumers' first 
contact in the vehicle-buying or -leasing process. Dealers utilize a 
variety of means to

[[Page 595]]

reach consumers, including social media and online advertisements, 
television and radio commercials, and direct mail marketing. New 
vehicle dealers spend an average of more than $700 on advertising per 
vehicle sold \54\--more than two-thirds of which goes toward online 
advertising.\55\
---------------------------------------------------------------------------

    \54\ Nat'l Auto. Dealers Ass'n, ``NADA Data 2022'' 15, https://www.nada.org/media/4695/download?inline (listing average dealership 
advertising per new vehicle sold of $718 in 2022, and $602 in 2021).
    \55\ Id. at 16 (listing 68.2% of estimated advertising 
expenditures by medium as internet expenditures).
---------------------------------------------------------------------------

    The FTC has brought many law enforcement actions involving motor 
vehicle dealers' deceptive advertising and other unlawful tactics. Such 
actions have charged dealers with, inter alia, making 
misrepresentations regarding the price of a vehicle, the availability 
of discounts and rebates, the monthly payment amount for a financed 
purchase or lease, the amount due at signing, and whether an offer 
pertains to a purchase or a lease.\56\ Other such actions have charged 
dealers with misrepresentations regarding whether the dealer or 
consumer is responsible for paying off ``negative equity,'' i.e., the 
outstanding debt on a vehicle that is being ``traded in'' as part of 
another vehicle purchase.\57\ And in other FTC actions, some dealers 
have lured potential buyers through financial incentives incidental to 
the purchase, such as deceptive promises of a valuable prize that is 
redeemable only by visiting the dealership.\58\
---------------------------------------------------------------------------

    \56\ See, e.g., Complaint, Timonium Chrysler, Inc., No. C-4429 
(F.T.C. Jan. 28, 2014) (alleging dealership advertised internet 
prices and dealer discounts that were only available through rebates 
not applicable to the typical consumer); Complaint, Ganley Ford 
West, Inc., No. C-4428 (F.T.C. Jan. 28, 2014) (alleging dealership 
advertised discounts on vehicle prices, but failed to disclose that 
discounts were only available on the most expensive models); 
Complaint, Progressive Chevrolet Co., No. C-4578 (F.T.C. June 13, 
2016) (alleging deceptive failure to disclose material conditions of 
obtaining the lease monthly payment in their online and print 
advertising); Complaint ]] 38-46, Fed. Trade Comm'n v. Tate's Auto 
Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 
2018) (alleging that company issued advertisements for attractive 
terms but concealed that the terms were only applicable to lease 
offers); Complaint ]] 36-38, United States v. New World Auto 
Imports, Inc., No. 3:16-cv-02401-K (N.D. Tex. Aug. 18, 2016) 
(alleging misrepresentation that terms were for financing instead of 
leasing); Complaint ]] 85-87, Fed. Trade Comm'n v. Universal City 
Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging 
that dealerships claimed consumers could finance the purchase of 
vehicles with attractive terms and buried disclosures indicating 
that such terms were applicable to leases only).
    \57\ Complaint ]] 82-84, Fed. Trade Comm'n v. Universal City 
Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging 
misrepresentation that dealer would pay off a consumer's trade-in 
when in fact consumers were still responsible for outstanding debt 
on trade-in vehicles); Complaint ]] 17-19, TXVT Ltd. P'ship, No. C-
4508 (F.T.C. Feb. 12, 2015) (alleging misrepresentation in leasing 
advertising that the dealership would pay off the negative equity of 
a consumer's trade in vehicle, when in fact, it was merely rolled 
into the financed amount for the consumer's newly financed vehicle).
    \58\ See, e.g., Complaint ]] 12, 17-19, Traffic Jam Events, LLC, 
No. 9395 (F.T.C. Aug. 7, 2020); Complaint ]] 4, 7-9, Fowlerville 
Ford, Inc., No. C-4433 (F.T.C. Feb. 20, 2014).
---------------------------------------------------------------------------

    Deceptive tactics can cause significant consumer harm and impede 
competition, competitively disadvantaging law-abiding dealers. When 
dealerships advertise prices, discounts, or other terms that are not 
actually available to typical consumers, consumers who select that 
dealership instead of others spend time visiting the dealership or 
otherwise interacting with the dealership under false pretenses.
2. Unlawful Practices Relating to Add-On Products or Services and 
Hidden Charges
    Another key consumer protection concern is the sale of add-on 
products or services in a deceptive or unfair manner. Add-ons in 
connection with the sale or financing of motor vehicles include 
extended warranties, service and maintenance plans, payment programs, 
guaranteed automobile or asset protection (``GAP'') agreements, 
emergency road service, VIN etching and other theft protection devices, 
and undercoating. Individual add-ons can cost consumers thousands of 
dollars and can significantly increase the overall cost to the consumer 
in the transaction.\59\ Moreover, in the past two years, dealers have 
substantially increased prices for these add-ons, notwithstanding that 
such products or services largely are not constrained by supply.\60\
---------------------------------------------------------------------------

    \59\ See, e.g., Complaint ]] 25, 27-28, Fed. Trade Comm'n v. N. 
Am. Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 2022).
    \60\ See Ben Eisen, ``Car Dealer Markups Helped Drive Inflation, 
Study Finds,'' Wall St. J., Apr. 23, 2023, https://www.wsj.com/articles/car-dealer-markups-helped-drive-inflation-study-finds-7c1d5a2d; U.S. Bureau of Labor Statistics, ``Automotive Dealerships 
2019-2022: Dealer Markup Increases Drive New-Vehicle Consumer 
Inflation'' (Apr. 2023), https://www.bls.gov/opub/mlr/2023/article/automotive-dealerships-markups.htm.
---------------------------------------------------------------------------

    A significant consumer protection concern is consumers paying for 
add-ons without knowing about, or expressly agreeing to, these products 
or services.\61\ This type of payment packing has been a particular 
concern in the military community.\62\ The protracted and paperwork-
heavy vehicle-buying or -leasing process can make it difficult for 
consumers to spot add-on charges, particularly when advertised prices 
or payment terms do not mention add-ons.\63\ If consumers are financing 
or leasing the vehicle, they undergo a separate financing process after 
selecting a vehicle, which can include wading through a thick stack of 
dense paperwork filled with fine print.\64\ For example, according to 
an FTC law enforcement action, consumers visiting one large dealership 
group were required to complete a stack of paperwork that ran more than 
sixty pages and required more than a dozen signatures.\65\ This 
paperwork can include hidden charges for add-on products or services, 
causing consumers

[[Page 596]]

to purchase those add-ons without knowing about or agreeing to them, or 
without knowing or agreeing to their costs or other key terms.\66\ 
Unscrupulous dealers are able to slip the often considerable additional 
costs for these items past consumers unnoticed and into purchase 
contracts through a variety of means, including by not mentioning them 
at all,\67\ or by focusing consumers' attention on other aspects of the 
complex transaction, such as monthly payments, which might increase 
only marginally with the addition of prorated add-on costs, or may even 
be made to decrease if the financing term is extended.\68\ This type of 
conduct can target immigrants, communities of color, and 
servicemembers.\69\ In other instances, dealers might wait until late 
in the transaction to mention add-ons, and then do so in a misleading 
manner. For example, participants in an FTC qualitative study on 
consumers' car-buying experiences cited situations where dealers waited 
until the financing stage to mention add-ons, after consumers believed 
they had agreed on terms, and even though many add-ons have nothing to 
do with financing and were not mentioned at all during the sales 
process or when prices were initially negotiated.\70\ According to FTC 
enforcement actions, dealers also have represented that add-ons are 
required when in fact they are not,\71\ have misrepresented the 
purported benefits of add-ons, and have failed to disclose material 
limitations.\72\
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    \61\ See Nat'l Consumer L. Ctr., ``Auto Add-ons Add Up: How 
Dealer Discretion Drives Excessive, Arbitrary, and Discriminatory 
Pricing'' (Oct. 1, 2017), https://www.nclc.org/images/pdf/car_sales/report-auto-add-on.pdf; Adam J. Levitin, ``The Fast and the 
Usurious: Putting the Brakes on Auto Lending Abuses,'' 108 Geo. L.J. 
1257, 1265-66 (2020), https://www.law.georgetown.edu/georgetown-law-journal/wp-content/uploads/sites/26/2020/05/Levitin_The-Fast-and-the-Usurious-Putting-the-Brakes-on-Auto-Lending-Abuses.pdf 
(discussing ``loan packing'' as the sale of add-on products that are 
falsely represented as being required in order to obtain financing); 
Complaint ]] 12-19, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., 
No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging deceptive and 
unauthorized add-on charges in consumers' transactions); Complaint 
]] 59-64, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 
2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging deceptive and 
unauthorized add-on charges in consumers' transactions); Complaint 
]] 6, 9, TT of Longwood, Inc., No. C-4531 (F.T.C. July 2, 2015) 
(alleging misrepresentations regarding prices for added features); 
see also Auto Buyer Study, supra note 25, at 14 (``Several 
participants who thought that they had not purchased add-ons, or 
that the add-ons were included at no additional charge, were 
surprised to learn, when going through the paperwork, that they had 
in fact paid extra for add-ons. This is consistent with consumers' 
experiencing fatigue during the buying process or confusion with a 
financially complex transaction, but would also be consistent with 
dealer misrepresentations.'').
    \62\ Consumers for Auto Reliability and Safety, Comment Letter 
on Motor Vehicle Roundtables, Project No. P104811 at 2-3 (Apr. 1, 
2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf 
(citing a U.S. Department of Defense data call summary that found 
that the vast majority of military counselors have clients with auto 
financing problems and cited ``loan packing'' and yo-yo financing as 
the most frequent auto lending abuses affecting servicemembers).
    \63\ Complaint ]] 17-19, Fed. Trade Comm'n v. Liberty Chevrolet, 
Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020); Complaint ] 60, 
Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 
(C.D. Cal. Sept. 29, 2016); Carole L. Reynolds & Stephanie E. Cox, 
Fed. Trade Comm'n, ``Buckle Up: Navigating Auto Sales and 
Financing'' (2020) [hereinafter Buckle Up], https://www.ftc.gov/reports/buckle-navigating-auto-sales-financing.
    \64\ See, e.g., Buckle Up, supra note 63, at 10-11 (noting the 
long, complex transaction process); Complaint ]] 23-28, Fed. Trade 
Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. 
Mar. 31, 2022) (same).
    \65\ Complaint ] 24, Fed. Trade Comm'n v. N. Am. Auto. Servs., 
Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); see also Buckle 
Up, supra note 63, at 10-11.
    \66\ Complaint ]] 25, 27, 29-32, Fed. Trade Comm'n v. N. Am. 
Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); see 
also Complaint ]] 17-19, Fed. Trade Comm'n v. Liberty Chevrolet, 
Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020); Dale Irwin, Slough 
Connealy Irwin & Madden LLC, Comment Letter on Public Roundtables: 
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 
Project No. P104811, Submission No. 558507-00060 (Dec. 29, 2011), 
https://www.regulations.gov/comment/FTC-2022-0036-0051 (consumer 
protection lawyer noting ``payment packing'' among problems ``that 
cry out for scrutiny and regulation''); Michael Archer, Comment 
Letter on Public Roundtables: Protecting Consumers in the Sale and 
Leasing of Motor Vehicles, Project No. P104811, Submission No. 
558507-00041 at 3 (Aug. 6, 2011), https://www.regulations.gov/comment/FTC-2022-0036-0014 (workshop panelist stating, ``I have seen 
cases wherein the dealer uses financing to pack in extra costs or to 
wipe out trade-in value.''); Dawn Smith, Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00027 (July 27, 
2011), https://www.regulations.gov/comment/FTC-2022-0036-0043 
(``Confusing or misleading sales terms[.] Extra fees was [sic] added 
at the time of purchase and to this day I still do not understand 
what the fee was for; it made the payment higher.''); Carrie 
Ferraro, Legal Servs. of N.J., Comment Letter on Public Roundtables: 
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 
Project No. P104811, Submission No. 558507-00061 (Dec. 29, 2011), 
https://www.regulations.gov/comment/FTC-2022-0036-0059 (citing 
``[d]ealers engage[d] in packing'' as an example of the common 
consumer complaints of car-sales-related fraud received by LSNJ's 
legal advice hotline); Rosemary Shahan, Consumers for Auto 
Reliability and Safety, Comment Letter on Public Roundtables: 
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 
Project No. P104811, Submission No. 558507-00069 at 3 (Jan. 31, 
2012), https://www.regulations.gov/comment/FTC-2022-0036-0069 
(noting that ``[m]any common auto scams do not generate complaints 
in proportion to how pervasive or costly the practices are, simply 
because the consumers generally remain unaware they have been 
scammed,'' including as a result of ``[l]oan packing''); Mary W. 
Sullivan, Matthew T. Jones & Carole L. Reynolds, Fed. Trade Comm'n, 
``The Auto Buyer Study: Lessons from In-Depth Consumer Interviews 
and Related Research,'' Supplemental Appendix: Redacted Interview 
Transcripts at 525 (2020) [hereinafter Auto Buyer Study: Appendix], 
https://www.ftc.gov/system/files/documents/reports/buckle-navigating-auto-sales-financing/bcpstaffreportautobuyerstudysuppappendix.pdf (Study participant 
169810: consumer had ``additional items'' charges on contract that 
consumer could not identify); id. at 730, 740-42 (Study participant 
188329: dealer did not tell consumer about GAP or service contract 
but consumer was charged $599 and $1,950 for those add-ons, 
respectively); Press Release, N.Y. State Att'y Gen., ``A.G. 
Schneiderman Announces Nearly $14 Million Settlement with NYC and 
Westchester Auto Dealerships for Deceptive Practices that Resulted 
in Inflated Car Prices'' (June 17, 2015), https://ag.ny.gov/press-release/2015/ag-schneiderman-announces-nearly-14-million-settlement-nyc-and-westchester-auto (``This settlement is part of the [New 
York] attorney general's wider initiative to end the practice of 
`jamming,' unlawfully charging consumers for hidden purchases by car 
dealerships.'').
    \67\ Under the Truth in Lending Act (``TILA'') and its 
implementing Regulation Z, required add-on products or services must 
be factored into the APR and the finance charge disclosed during the 
transaction. See 15 U.S.C. 1605, 1606, 1638; 12 CFR 226.4, 
226.18(b), (d), (e), and 226.22. It is legally impermissible for 
dealers to include charges for such products in a consumer's 
contract without disclosing them. See, e.g., Complaint ]] 57-60, 
Fed. Trade Comm'n v. Stewart Fin. Co. Holdings, Inc., No. 1:03-CV-
2648 (N.D. Ga. Sept. 4, 2003) (alleging violations for failure to 
include the cost of required add-on products in the finance charge 
and annual percentage rate disclosed to consumers).
    \68\ See, e.g., Buckle Up, supra note 63, at 6; Fed. Trade 
Comm'n, Military Consumer Financial Workshop, Panel 1, Tr. 19:25-41 
(July 19, 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; Fed. Trade Comm'n, ``The Road Ahead: 
Selling, Financing & Leasing Motor Vehicles,'' Public Roundtable, 
Session 2, Tr. at 40-41 (Aug. 2 2011), https://www.ftc.gov/news-events/events/2011/08/road-ahead-selling-financing-leasing-motor-vehicles (noting that optional products and services are often 
already included in the monthly payment prices advertised or 
quoted); Christopher Kukla, Ctr. for Responsible Lending, Comment 
Letter on Public Roundtables: Protecting Consumers in the Sale and 
Leasing of Motor Vehicles, Project No. P104811, Submission No. 
558507-00071 at 10 (Feb. 1, 2012), https://www.regulations.gov/comment/FTC-2022-0036-0068 (discussing how dealers conceal packing 
by expressing an increase in price in terms of monthly payment); 
Att'ys General of 31 States & DC, Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00112 at 5 
(Apr. 13, 2012), https://www.regulations.gov/comment/FTC-2022-0036-0124 (discussing the ``age-old auto salesperson's trick'' of quoting 
monthly payment prices without disclosing that the quote includes 
the cost of optional items that the customer has not yet agreed to 
purchase).
    \69\ See, e.g., Complaint ]] 9, 26, Fed. Trade Comm'n v. Liberty 
Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (charging 
defendants with discriminating on the basis of race, color, and 
national origin by charging higher interest rates and inflated 
fees); Press Release, N.Y. State Att'y Gen., ``Attorney General 
James Delivers Restitution to New Yorkers Cheated by Auto 
Dealership'' (Nov. 17, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-delivers-restitution-new-yorkers-cheated-auto-dealership (dealership targeted Chinese speakers for unlawful 
payment packing or ``jamming''); Military Consumer Financial 
Workshop, Tr. 19:21 (July 19, 2017), https://www.ftc.gov/news-events/events/2017/07/military-consumer-workshop (panelist 
discussing servicemembers experiencing payment packing); see also 
Fed. Trade Comm'n, ``Staff Perspective: A Closer Look at the 
Military Consumer Financial Workshop'' 2-3 (Feb. 2018), https://www.ftc.gov/system/files/documents/reports/closer-look-military-consumer-financial-workshop-federal-trade-commission-staff-perspective/military_consumer_workshop_-_staff_perspective_2-2-18.pdf (explaining the unique situation of servicemembers whose 
steady paychecks make them attractive customers for dealers, while 
having no or minimal credit history, meaning they qualify for less 
advantageous credit terms and higher interest rate financing).
    \70\ See, e.g., Buckle Up, supra note 63, at 6 (observing that 
the introduction of ``add-ons during financing discussions caused 
several participants' total sale price to balloon from the cash 
price''); id. at 9 (observing that, for most consumers in the study, 
``add-ons did not come up until the financing process, if at all, 
after a long car-buying process and at a time when the consumer 
often felt pressure to close the deal''); id. (noting that most 
study participants' contracts included add-ons charges, but that 
many ``were unclear what those add-ons included, and sometimes did 
not realize they had purchased any add-ons at all''); id. at 7 
(explaining situations where the consumer reached the financing 
office after negotiating with the sales staff and were then told 
that the agreed upon price was not compatible with key financing 
terms--for example, a promised rebate or discount could not be 
combined with an advertised interest rate).
    \71\ Complaint ]] 12-19, Fed. Trade Comm'n v. Liberty Chevrolet, 
Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging deceptive 
and unauthorized add-on charges in consumers' transactions); 
Complaint ]] 59-64, Fed. Trade Comm'n v. Universal City Nissan, 
Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging 
deceptive and unauthorized add-on charges in consumers' 
transactions); Complaint ]] 6, 9, TT of Longwood, No. C-4531 (F.T.C. 
July 2, 2015) (alleging misrepresentations regarding prices for 
added features); see also Auto Buyer Study, supra note 25, at 14.
    \72\ Complaint ]] 4-14, Nat'l Payment Network, Inc., No. C-4521 
(F.T.C. May 4, 2015) (alleging failure to disclose fees associated 
with financing program; misleading savings claims in 
advertisements); Complaint ]] 4-13, Matt Blatt Inc., No. C-4532 
(F.T.C. July 2, 2015) (alleging failure to disclose fees associated 
with financing program; misleading savings claims); Buckle Up, supra 
note 63, at 10 (noting that some Auto Buyer Study participants did 
not fully understand material aspects of extended warranties or 
service plans they purchased and ``were surprised to discover during 
the interview that their plans had unexpected limitations'' or that 
``they had to pay out-of-pocket for repairs or services that were 
not covered''; for example, one ``consumer purchased a `Lifetime' 
maintenance plan, only to discover later that he received a one-year 
plan that covered periodic oil changes''). Cf. Consent Order ]] 10-
16, Santander Consumer USA, Inc., CFPB No. 2018-BCFP-0008 (Nov. 20, 
2018) (finding that defendant sold GAP product allegedly providing 
``full coverage'' to consumers with loan-to-value ratios (``LTVs'') 
above 125%, when in fact coverage was limited to 125% of LTV).

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[[Page 597]]

    Indeed, as previously noted, in a recent FTC enforcement action, 
the Commission cited a survey finding that 83% of consumers from the 
named dealers were charged for add-on products or services that they 
did not authorize or as a result of deceptive claims.\73\
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    \73\ Complaint ] 27, Fed. Trade Comm'n v. N. Am. Auto. Servs., 
Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022).
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    One participant in an FTC qualitative study of consumers' car-
buying experiences summed up these issues during an interview after 
having purchased a vehicle.\74\ The consumer purchased a $2,000 service 
contract that the dealer falsely said was free, and a $900 GAP 
agreement that the dealer falsely said was mandatory. The consumer only 
learned about these purchases during the study interview. This consumer 
remarked:
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    \74\ The study is described in the Commission's reports: Auto 
Buyer Study, supra note 25, and Buckle Up, supra note 63. Some 
industry commenters critiqued the FTC's reliance on this qualitative 
study. The Commission notes that the study provides helpful 
qualitative insight from consumer interviews regarding their recent 
motor vehicle purchases and is one of the many sources the 
Commission has considered, including consumer complaints, 
enforcement actions, outreach and dialogue with stakeholders and 
consumer groups, among others, as described in this SBP and in the 
NPRM.

    I feel I've been taken advantage of, to be honest with you. Even 
though I thought that I was getting a great deal with the interest 
rate, but I know [sic] see that they're also very sneaky about 
putting stuff on your paperwork. They only let you skim through the 
paperwork that you have to sign and they just kind of tell you what 
it is. This is this, this is that, this is this, and then you just 
sign it away. You're so tired, you're so worn down, you don't want 
to be there no more. You just want to get it done and over with. 
They take advantage of that. Yes, they still play this friendly 
card, you know, thank you for your business card kind of thing. Like 
I said, they never lose. They never lose.\75\
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    \75\ Auto Buyer Study: Appendix, supra note 66, at 130 (Study 
participant 152288); see also id. at 202-03 (Study participant 
180267: dealership included a charge for GAP in the final paperwork 
but not in retail sales contract); id. at 296 (Study participant 
146748: consumer learned during interview with FTC that consumer 
purchased GAP: ``maybe they're just throwing that in there without 
telling you'').

    Similarly, in response to the Commission's notice of proposed 
rulemaking, thousands of commenters described issues they faced when 
purchasing, financing, or leasing a vehicle. Many comments the 
Commission received in support of the NPRM were from self-identified 
military consumers and dealership employees. Examples of supportive 
comments include the following:
    <bullet> As a young Marine stationed in a military town I was taken 
advantage of by a dealership when purchasing my first car. It set me 
back financially for years. I know of many young military people who 
purchased vehicle[]s and we[]re instantly so far upside down after 
leaving the dealership with thousands of dollars in add on junk charges 
. . . . Please make it more difficult for dishonest dealers like these 
to financially burden young Americans and Americans of any age for that 
matter.\76\
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    \76\ Individual commenter, Doc. No. FTC-2022-0046-4648.
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    <bullet> Imagine going to a restaurant franchise and order[ing] a 
burger and fries for $10 and the franchise employees say[,] `Sorry that 
will be $25 dollars, there is a $10 restaurant adjustment price due to 
market conditions and $5 for us to place and document your order.' You 
would walk away without hesitation because that would [be] absolutely 
ridiculous. Yet, dealerships are allowed to do exactly that. . . . IT 
IS TIME TO CHANGE AND PROTECT CONSUMERS[.]\77\
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    \77\ Individual commenter, Doc. No. FTC-2022-0046-0016.
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    <bullet> As in many other areas, it is the vulnerable in our 
society who are probably most affected by such deceptive practices. . . 
. Sadly, it is often these very people who desperately need a 
dependable, affordable car for transportation to work, school, 
shopping, or medical care. To entice, pressure, or trick people into 
buying a car that is more than they can afford sets them up for 
financial failure, not only in possibly having a needed car 
repossessed, but in long-term damage to their credit. . . . In closing, 
I would be extremely happy to see rules such as those described above 
enacted, and don't think these could come a day too soon. It's a step 
in the right direction for the protection of the consumer.\78\
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    \78\ Individual commenter, Doc. No. FTC-2022-0046-1216.
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    <bullet> None of us working here at the dealership in sales benefit 
from [unfair and deceptive practices]. We cringe as much as every 
customer and have to show up to work every[ ]day and hope we are not 
forced to screw someone with these BS products. . . . I would hope when 
[t]he regulators are making their decisions, they understand the 
positive implications this would have for dealership employees both 
financially and mentally.\79\
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    \79\ Individual commenter, Doc. No. FTC-2022-0046-3615.
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    <bullet> Generally, I'm not a person in favor of government 
regulation. However, as a potential customer and cash buyer, I feel 
there is certainly a need to bring car dealers back into check. I'm 
just looking for a more honest and transparent process. I don't want to 
be taken advantage of. I certainly don't want my family members or 
[s]oldiers to be taken advantage of. Therefore, I feel it is in the 
best interest of future customers to support this regulation.\80\
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    \80\ Individual commenter, Doc. No. FTC-2022-0046-7366.
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    <bullet> I cannot stress enough my support for these new rules. 
Currently, dealerships across the US, including the one I work for, 
have made the car buying process needlessly confusing, expensive, and 
frustrating by engaging in false advertising and hidden add-on 
products.\81\
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    \81\ Individual commenter, Doc. No. FTC-2022-0046-3693.
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    <bullet> I can tell you after many years of car buying I have NEVER 
walked out of a dealership feeling good. Even worse, I've never 
purchased a car feeling like I fully understood what I was getting. . . 
. Looking forward to seeing the change happen SOON! \82\
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    \82\ Individual commenter, Doc. No. FTC-2022-0046-3678.
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    <bullet> When I buy a gallon of milk from the store, the price is 
written next to the milk. When I go pay, I pay the price advertised 
next to the milk. Would it be OK if I go up to pay and that gallon of 
milk had anywhere between 1% and 1,200% markup depending on the day, 
what you look like, what you drove to the store in, if you're a man or 
a woman? \83\
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    \83\ Individual commenter, Doc. No. FTC-2022-0046-1479.
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    <bullet> We ended up having to drive 3 hours to the [vehicle we] 
wanted. Upon arriving to pick[ ]up the car we were told there was a 
[$]4,300 increase over MSRP. We were told if we didn't take it they had 
someone else waiting to purchase it. We needed the car and didn't have 
time to hunt down another one so ended up purchasing it. Very 
disappointed in the long and awful process.\84\
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    \84\ Individual commenter, Doc. No. FTC-2022-0046-1878.
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    <bullet> The worst is dealing with car dealers. You never know what 
the real price is on a vehicle until you spend a few hours with them. 
Mandatory add[-] on[ ]s, market availability surcharges, doc fees that 
vary from dealer to dealer. . . . Then dealing with the finance manager 
who tr[ie]s to sell you everything you don't[ ]need. They high pressure 
the consumer on purchasing extend[ed] warranties. There

[[Page 598]]

needs [to be] some sort of policing [of] these unscrupulous car dealers 
to protect the buyers.\85\
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    \85\ Individual commenter, Doc. No. FTC-2022-0046-0825.
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    <bullet> This is a good start to making car purchasing a better 
experience. . . . I remember looking at a Lexus and being told by the 
dealership, the only one in the state, that [S]cotchguard and 
undercoating were mandatory and they refused to sell any vehicles 
without them. There were two Acura dealerships in town and one of them 
included `free' lifetime oil changes that I didn't learn about until 
negotiating the price and had already spent two hours in negotiations. 
All of these services/price adjustments were not disclosed at the start 
of the negotiation and were only revealed either in the manager's 
office or when the purchase agreement was presented to me by the 
salesperson. After spending time on the test drive and negotiating the 
price, it felt that these last minute price adjustments were being 
revealed that late in the process so that I wouldn't leave.\86\
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    \86\ Individual commenter, Doc. No. FTC-2022-0046-4833.
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    <bullet> Please enact and enforce these regulations to protect 
vulnerable consumers from predatory business practices enjoyed by 
dealers. Our family experienced such practices when trying to purchase 
a vehicle in early 2022. It was only after five hours at the dealership 
that we discovered the dealer had added on a $3,000 market adjustment 
and $3,100 in other add-ons (nitrogen-filled tires, LoJack, paint 
protection) to MSRP. This raised the price by about $6,000 and caused 
us to use extra PTO over that week to find a new vehicle at a price 
within our budget. Greater transparency in the car-buying process is 
desperately needed to protect vulnerable consumers--who usually lack 
any bargaining power--against power dealer networks and their special 
interest groups. . . .\87\
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    \87\ Individual commenter, Doc. No. FTC-2022-0046-1690.
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C. Law Enforcement and Other Responses

    The Commission has taken action to protect consumers from deceptive 
and unfair acts or practices in the motor vehicle marketplace. As noted 
in the NPRM, the Commission has brought more than 50 auto law 
enforcement actions; \88\ led two law enforcement sweeps, including one 
that involved 181 State enforcement actions; \89\ published two reports 
on a qualitative study of consumer experiences while purchasing motor 
vehicles; and held workshops with various stakeholders to discuss the 
motor vehicle marketplace.\90\
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    \88\ Complaint, Fed. Trade Comm'n v. Rhinelander Auto Ctr., 
Inc., No. 3:23-cv-00737 (W.D. Wis. Oct. 24, 2023); Complaint, Fed. 
Trade Comm'n v. Passport Auto. Grp., Inc., No. 8:22-cv-02670-GLS (D. 
Md. Oct. 18, 2022); Complaint, Fed. Trade Comm'n v. N. Am. Auto. 
Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022); 
Complaint, Traffic Jam Events, LLC, No. 9395 (F.T.C. Aug. 7, 2020); 
Complaint, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-
cv-03945 (S.D.N.Y. May 21, 2020); Complaint, Federal-Mogul 
Motorparts LLC, No. C-4717 (F.T.C. May 12, 2020); Complaint, 
LightYear Dealer Techs., LLC, No. C-4687 (F.T.C. Sept. 3, 2019); 
Complaint, Fed. Trade Comm'n v. Passport Imports, Inc., No. 8:18-cv-
03118 (D. Md. Oct. 10, 2018); Complaint, Fed. Trade Comm'n v. Tate's 
Auto Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 
2018); Complaint, Cowboy AG, LLC, No. C-4639 (F.T.C. Jan. 4, 2018); 
Complaint, Fed. Trade Comm'n v. Norm Reeves, Inc., No. 8:17-cv-01942 
(C.D. Cal. Nov. 3, 2017); Complaint, Asbury Auto. Grp., Inc., No. C-
4606 (F.T.C. Mar. 22, 2017); Complaint, CarMax, Inc., No. C-4605 
(F.T.C. Mar. 22, 2017); Complaint, West-Herr Auto. Grp., Inc., No. 
C-4607 (F.T.C. Mar. 22, 2017); Complaint, Fed. Trade Comm'n v. 
Volkswagen Grp. of Am., Inc., No. 3:16-cv-01534 (N.D. Cal. Jan. 31, 
2017); Complaint, Fed. Trade Comm'n v. Uber Techs., Inc., No. 3:17-
cv-00261 (N.D. Cal. Jan. 19, 2017); Complaint, Gen. Motors LLC, No. 
C-4596 (F.T.C. Dec. 8, 2016); Complaint, Jim Koons Mgmt. Co., No. C-
4598 (F.T.C. Dec. 8, 2016); Complaint, Lithia Motors, Inc., No. C-
4597 (F.T.C. Dec. 8, 2016); Complaint, Fed. Trade Comm'n v. 
Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sep. 29, 
2016); Complaint, United States v. New World Auto Imports, Inc., No. 
3:16-cv-02401-K (N.D. Tex. Aug. 18, 2016); Complaint, Progressive 
Chevrolet Co., No. C-4578 (F.T.C. June 13, 2016); Complaint, BMW of 
N. Am., LLC, No. C-4555 (F.T.C. Oct. 21, 2015); Complaint, United 
States v. Tricolor Auto Acceptance, LLC, No. 3:15-cv-3002 (N.D. Tex. 
Sept. 15, 2015); Complaint, JS Autoworld, Inc., No. C-4535 (F.T.C. 
Aug. 13, 2015); Complaint, TC Dealership, L.P., No. C-4536 (F.T.C. 
Aug. 13, 2015); Complaint, Matt Blatt Inc., No. C-4532 (F.T.C. July 
2, 2015); Complaint, TT of Longwood, Inc., No. C-4531 (F.T.C. July 
2, 2015); Complaint, Fin. Select, Inc., No. C-4528 (F.T.C. June 2, 
2015); Complaint, First Am. Title Lending of Ga., LLC, No. C-4529 
(F.T.C. June 2, 2015); Complaint, City Nissan Inc., No. C-4524 
(F.T.C. May 4, 2015); Complaint, Jim Burke Auto., Inc., No. C-4523 
(F.T.C. May 4, 2015); Complaint, Nat'l Payment Network, Inc., No. C-
4521 (F.T.C. May 4, 2015); Complaint, TXVT Ltd. P'ship, No. C-4508 
(F.T.C. Feb. 12, 2015); Complaint, Fed. Trade Comm'n v. Regency Fin. 
Servs., LLC, No. 1:15-cv-20270-DPG (S.D. Fla. Jan. 26, 2015); 
Complaint, United States v. Billion Auto, Inc., No. 5:14-cv-04118-
MWB (N.D. Iowa Dec. 11, 2014); Complaint, Fed. Trade Comm'n v. Ramey 
Motors, Inc., No. 1:14-cv-29603 (S.D. W. Va. Dec. 11, 2014); 
Complaint, Fed. Trade Comm'n v. Consumer Portfolio Servs., Inc., No. 
14-cv-00819 (C.D. Cal. May 28, 2014); Complaint, Nissan N. Am., 
Inc., No. C-4454 (F.T.C. May 1, 2014); Complaint, TBWA Worldwide, 
Inc., No. C-4455 (F.T.C. May 1, 2014); Complaint, Bill Robertson & 
Sons, Inc., No. C-4451 (F.T.C. Apr. 11, 2014); Complaint, Paramount 
Kia of Hickory, LLC, No. C-4450 (F.T.C. Apr. 11, 2014); Complaint, 
Fed. Trade Comm'n v. Abernathy Motor Co., No. 3:14-cv-00063-BRW 
(E.D. Ark. Mar. 12, 2014); Complaint, Fowlerville Ford, Inc., No. C-
4433 (F.T.C. Feb. 20, 2014); Complaint, Infiniti of Clarendon Hills, 
Inc., No. C-4438 (F.T.C. Feb. 20, 2014); Complaint, Luis Alfonso 
Sierra, No. C-4434 (F.T.C. Feb. 20, 2014); Complaint, Mohammad 
Sabha, No. C-4435 (F.T.C. Feb. 20, 2014); Complaint, Norm Reeves, 
Inc., No. C-4436 (F.T.C. Feb. 20, 2014); Complaint, Ganley Ford 
West, Inc., No. C-4428 (F.T.C. Jan. 28, 2014); Complaint, Timonium 
Chrysler, Inc., No. C-4429 (F.T.C. Jan. 28, 2014); Complaint, 
Courtesy Auto Grp., Inc., No. 9359 (F.T.C. Jan. 7, 2014); Complaint, 
Franklin's Budget Car Sales, Inc., No. C-4371 (F.T.C. Oct. 3, 2012); 
Complaint, Fed. Trade Comm'n v. Matthew J. Loewen, No. 2:12-cv-
01207-MJP (W.D. Wash. July 13, 2012); Complaint, Key Hyundai of 
Manchester, LLC, No. C-4358 (F.T.C. May 4, 2012); Complaint, Billion 
Auto, Inc., No. C-4356 (F.T.C. May 1, 2012); Complaint, Frank Myers 
AutoMaxx, LLC, No. C-4353 (F.T.C. Apr. 19, 2012); Complaint, Ramey 
Motors, Inc., No. C-4354 (F.T.C. Apr. 19, 2012); Complaint, Fed. 
Trade Comm'n v. Hope for Car Owners, LLC, No. 2:12-cv-00778-GEB-EFB 
(E.D. Cal. Mar. 27, 2012); Complaint, Fed. Trade Comm'n v. NAFSO 
VLM, Inc., No. 2:12-cv-00781-KJM-EFB (E.D. Cal. Mar. 27, 2012); 
Complaint, Fed. Trade Comm'n v. Stewart Fin. Co. Holdings, Inc., No. 
1:03-CV-2648 (N.D. Ga. Sept. 4, 2003); Complaint, Pacifico Ardmore, 
Inc., No. C-3920 (F.T.C. Feb. 7, 2000).
    \89\ Operation Steer Clear and Operation Ruse Control, brought 
with State law enforcement partners around the nation and Canada, 
encompassed 252 enforcement actions. See Press Release, Fed. Trade 
Comm'n, ``Multiple Law Enforcement Partners Announce Crackdown on 
Deception, Fraud in Auto Sales, Financing and Leasing'' (Mar. 26, 
2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown.
    \90\ For example, the FTC has held public workshops: (1) in 
conjunction with the National Highway Traffic Safety Administration 
to examine the consumer privacy and security issues posed by 
automated and connected motor vehicles, see Fed. Trade Comm'n, 
``Connected Cars: Privacy, Security Issues Related to Connected, 
Automated Vehicles'' (June 28, 2017), https://www.ftc.gov/news-events/events-calendar/2017/06/connected-cars-privacy-security-issues-related-connected; (2) to explore competition and related 
issues in the U.S. motor vehicle distribution system including how 
consumers and businesses may be affected by State regulations and 
emerging trends in the industry, see Fed. Trade Comm'n, ``Auto 
Distribution: Current Issues & Future Trends'' (Jan. 19, 2016), 
https://www.ftc.gov/news-events/events-calendar/2016/01/auto-distribution-current-issues-future-trends; (3) on military consumer 
financial issues, including automobile purchases, financing, and 
leasing, see Fed. Trade Comm'n, ``Military Consumer Workshop'' (July 
19, 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; and (4) through a series of three roundtables on 
numerous issues in selling, financing, and leasing automobiles, see 
Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing & Leasing 
Motor Vehicles'' (Apr. 12, 2011), https://www.ftc.gov/news-events/events-calendar/2011/04/road-ahead-selling-financing-leasing-motor-vehicles; Fed. Trade Comm'n, ``The Road Ahead: Selling, Financing & 
Leasing Motor Vehicles'' (Aug. 2, 2011), https://www.ftc.gov/news-events/events-calendar/2011/08/road-ahead-selling-financing-leasing-motor-vehicles; Fed. Trade Comm'n, ``The Road Ahead: Selling, 
Financing & Leasing Motor Vehicles'' (Nov. 17, 2011), https://www.ftc.gov/news-events/events-calendar/2011/11/road-ahead-selling-financing-leasing-motor-vehicles; see also Consumers for Auto 
Reliability and Safety, Comment Letter on Motor Vehicle Roundtables, 
Project No. P104811, at 6 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf (stating that the Director of the 
Navy-Marine Corps Relief Society in San Diego indicated before the 
California Assembly Committee on Banking and Finance that ``the 
number one issue they are confronted with is used car dealers who 
are taking advantage of military personnel''). These events, and 
others, have included speakers representing consumers, dealers, 
regulators, and other industry stakeholders.

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[[Page 599]]

    As discussed in the NPRM, the Commission's law enforcement partners 
have also brought actions addressing unfair, abusive, and deceptive 
practices in the motor vehicle industry. For example, the Consumer 
Financial Protection Bureau (``CFPB'') has taken action against third-
party motor vehicle financing entities in matters that raise similar, 
and sometimes identical, claims of deceptive and unfair acts or 
practices as have been at issue in FTC enforcement actions.\91\
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    \91\ The CFPB has brought at least 23 enforcement actions 
involving motor vehicles, financing, or add-on products or services. 
See Consent Order ]] 3, 13-57, Toyota Motor Credit Corp., CFPB No. 
2023-CFPB-0015 (Nov. 20, 2023) (finding auto lender engaged in 
unfair or abusive acts or practices by making it unreasonably 
difficult for consumers to cancel unwanted add-ons; failing to 
ensure consumers received refunds of payments they had made for 
certain add-ons that had become void and worthless; and failing to 
provide refunds owed to consumers who canceled their vehicle service 
agreements);
    Complaint ]] 75-104, CFPB v. USASF Servicing, LLC, No. 1:23-cv-
03433-VMC (N.D. Ga. Aug. 2, 2023) (alleging auto loan servicer 
illegally disabled and repossessed consumers' vehicles, wrongfully 
double-billed consumers, misapplied payments, and failed to ensure 
refunds of unearned GAP premiums to which consumers were entitled); 
Consent Order ]] 7-33, TMX Finance LLC, CFPB No. 2023-CFPB-0001 
(Feb. 23, 2023) (finding auto lender understated and inaccurately 
disclosed the finance charge and annual percentage rate on loans and 
unfairly charged borrowers for a product that provided no benefit); 
Complaint ]] 33-135, 171-226, CFPB v. Credit Acceptance Corp., No. 
1:23-cv-00038 (S.D.N.Y. Jan. 4, 2023) (alleging indirect auto lender 
misrepresented key terms of loans provided to subprime and deep-
subprime consumers and substantially assisted dealers in the 
deceptive sale of add-on products); Consent Order ]] 7-22, Wells 
Fargo Bank, N.A., CFPB No. 2022-CFPB-0011 (Dec. 20, 2022) (finding 
bank incorrectly applied borrowers' auto loan payments, erroneously 
assessed fees and interest, wrongly repossessed borrowers' vehicles, 
and failed to ensure borrowers received refunds of unearned GAP fees 
at early payoff); Consent Order ]] 4-55, Hyundai Capital America, 
CFPB No. 2022-CFPB-0005 (July 26, 2022) (finding auto finance 
company furnished inaccurate information about consumers to credit 
reporting agencies); Consent Order ]] 4-14, 3rd Generation, Inc., 
CFPB No. 2021-CFPB-0003 (May 21, 2021) (finding subprime auto loan 
servicer charged interest on late payments of fees without the 
knowledge or consent of consumers); Consent Order ]] 8-50, Santander 
Consumer USA Inc., CFPB No. 2020-BCFP-0027 (Dec. 22, 2020) (finding 
auto finance company provided inaccurate records to credit reporting 
agencies); Consent Order ]] 11-52, Nissan Motor Acceptance Corp., 
CFPB No. 2020-BCFP-0017 (Oct. 13, 2020) (finding auto finance 
company misrepresented financing extension agreements, 
repossessions, and limitations to consumer bankruptcy protections); 
Consent Order ]] 8-22, Lobel Fin. Corp., CFPB No. 2020-BCFP-0016 
(Sept. 21, 2020) (finding auto-loan servicer unfairly charged 
delinquent consumers add-on charges in the form of Loss Damage 
Waiver premiums); Consent Order ]] 6-30, Santander Consumer USA 
Inc., CFPB No. 2018-BCFP-0008 (Nov. 20, 2018) (finding auto finance 
company sold GAP to consumers with LTV over 125%, misrepresenting 
that such consumers would be fully covered with total loss);
    Consent Order ]] 27-39, Wells Fargo Bank, N.A., CFPB No. 2018-
BCFP-0001 (Apr. 20, 2018) (finding bank imposed duplicative or 
unnecessary forced-placed auto loan insurance on consumers); Consent 
Order ]] 12-23, Toyota Motor Credit Corp., CFPB No. 2016-CFPB-0002 
(Feb. 2, 2016) (finding auto finance company engaged in 
discriminatory pricing markup for motor vehicle financing, without 
regard to creditworthiness); Consent Order ]] 73-75, Y King S Corp., 
CFPB No. 2016-CFPB-0001 (Jan. 21, 2016) (finding used car dealer 
failed to disclose mandatory add-ons as financing charges); Consent 
Order ]] 12-51, Interstate Auto Grp., Inc., CFPB No. 2015-CFPB-0032 
(Dec. 17, 2015) (finding dealership and financing company reported 
information they knew or had reasonable cause to believe was 
inaccurate to credit reporting entities, harming consumer credit); 
Consent Order ]] 7-90, Westlake Servs., LLC, CFPB No. 2015-CFPB-0026 
(Sept. 30, 2015) (finding indirect auto financing entity used 
illegal debt collection tactics); Consent Order ]] 8-23, Fifth Third 
Bank, CFPB No. 2015-CFPB-0024 (Sept. 28, 2015) (finding 
discrimination against loan applicants in credit applications based 
on characteristics such as race and national origin); Consent Order 
]] 9-24, Am. Honda Fin. Corp., CFPB No. 2015-CFPB-0014 (July 14, 
2015) (same);
    Consent Order ]] 4-60, DriveTime Auto. Grp., Inc., CFPB No. 
2014-CFPB-0017 (Nov. 19, 2014) (finding buy-here-pay-here dealership 
made harassing debt collection calls and provided inaccurate credit 
information to credit reporting agencies); Consent Order ]] 4-37, 
First Investors Fin. Servs. Grp., Inc., CFPB No. 2014-CFPB-0012 
(Aug. 20, 2014) (finding auto financing company provided inaccurate 
records to credit reporting agencies); Consent Order ]] 7-27, Ally 
Fin. Inc., CFPB No. 2013-CFPB-0010 (Dec. 20, 2013) (finding auto 
lender engaged in discriminatory pricing); Consent Order ]] 14-29, 
U.S. Bank Nat'l Ass'n, CFPB No. 2013-CFPB-0004 (June 26, 2013) 
(finding bank failed to properly disclose all the fees charged to 
participants in the companies' Military Installment Loans and 
Educational Services auto loans program, and misrepresented the true 
cost and coverage of add-on products financed along with the auto 
loans); Consent Order ]] 10-22, Dealers' Fin. Servs., LLC, CFPB No. 
2013-CFPB-0004 (June 26, 2013) (finding financing company made 
deceptive statements regarding the cost of add-on products and the 
scope of coverage of the vehicle service contract).

    In addition, States have engaged in enforcement actions alleging 
similar dealer misconduct in the motor vehicle dealer marketplace, and 
have implemented legislative and regulatory measures to address 
corresponding consumer protection issues. With regard to law 
enforcement, State regulators and Attorneys General have participated 
in law enforcement sweeps with the FTC, and have filed hundreds of 
actions alleging unlawful conduct by motor vehicle dealerships across 
the country.\92\ Furthermore, with regard to legislative and regulatory 
efforts, at least four States have enacted consumer protection measures 
relating to pricing or add-ons by motor vehicle dealers.\93\ For 
example, to ``ensure that dealers do not add in hidden or undisclosed 
costs after the price for a vehicle has been advertised,'' Oregon 
promulgated a rule that requires dealerships to state an ``offering 
price'' that is the actual offer and amount the consumer can pay to own 
the vehicle, excluding only taxes and other specific items.\94\ 
California and Wisconsin have similarly enacted laws that make it 
unlawful for dealerships to advertise a total price without including 
additional costs to the purchaser outside the mandatory tax, title, and 
registration fees.\95\ Other States, such as Indiana, have enacted 
codes that prohibit the sale of add-ons in certain circumstances.\96\
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    \92\ Operation Steer Clear and Operation Ruse Control, brought 
with State law enforcement partners around the nation and Canada, 
encompassed 252 enforcement actions. See Press Release, Fed. Trade 
Comm'n, ``Multiple Law Enforcement Partners Announce Crackdown on 
Deception, Fraud in Auto Sales, Financing and Leasing'' (Mar. 26, 
2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown. Separately, 
the California Attorney General's office sued a dealership chain 
under State consumer protection laws for deceiving consumers about 
add-on product charges and misrepresenting consumers' income on 
credit applications; the alleged practices specifically targeted 
low-income consumers with subprime credit. Complaint ]] 37-86, 
People v. Paul Blanco's Good Car Co. Auto Grp., No. RG-19036081 
(Cal. Super. Ct. Sept. 23, 2019).
    \93\ See, e.g., Cal. Veh. Code 11713.1(b), (c); Or. Admin. R. 
137-020-0020(3)(c); Wis. Admin. Code Trans. 139.03(3); Ind. Code 24-
4.5-3-202.
    \94\ Or. Admin. R. 137-020-0020(3)(c); Official Commentary, Or. 
Admin. R. 137-020-0020(3)(c).
    \95\ Cal. Veh. Code 11713.1(b), (c); Wis. Admin. Code Trans. 
139.03(3).
    \96\ Ind. Code 24-4.5-3-202(3)(e)(ix) (prohibiting the sale of 
any GAP coverage when the LTV is less than 80%); Cal. Civ. Code 
2982.12(a)(5)(B) (prohibiting the sale of any GAP waiver in three 
scenarios, including when the amount financed for the vehicle 
exceeds the amount covered by the GAP waiver).
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    The Commission and its law enforcement partners also regularly 
provide business guidance and consumer education regarding the motor 
vehicle marketplace. The Commission has compiled its motor vehicle 
business guidance into a portal on its website, with links to guidance 
documents, frequently asked questions, and legal resources.\97\ 
Likewise, the Commission provides a web page for consumers to learn 
more about buying, financing, and leasing motor vehicles.\98\ Several 
States have published similar such guidance manuals for motor vehicle 
dealers,\99\

[[Page 600]]

while others have provided online consumer education resources.\100\
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    \97\ See Fed. Trade Comm'n, Business Guidance, ``Automobiles,'' 
https://www.ftc.gov/business-guidance/industry/automobiles (last 
visited Dec. 5, 2023).
    \98\ See Fed. Trade Comm'n, ``Buying and Owning a Car,'' https://consumer.ftc.gov/shopping-and-donating/buying-and-owning-car (last 
visited Dec. 5, 2023).
    \99\ See, e.g., Ill. Sec'y of State Police, Dealer Handbook 
(Apr. 2022), https://www.ilsos.gov/publications/pdf_publications/sos_dop66.pdf; Wis. DOT--Div. of Motor Vehicles, Motor Vehicle 
Salesperson Manual--2020, https://wisconsindot.gov/Documents/dmv/shared/salesmanual-20.pdf; Enf't Div. of the Tex. Dep't of Motor 
Vehicles, Motor Vehicle Dealer Manual (2017), https://www.txdmv.gov/sites/default/files/body-files/Motor_Vehicle_Dealer_Manual.pdf.
    \100\ See, e.g., Cal. Dept. of Just., ``Buying and Maintaining a 
Car,'' https://oag.ca.gov/consumers/general/cars (last visited Dec. 
5, 2023); Fla. Highway Safety & Motor Vehicles, ``Buying from a 
Licensed Dealer,'' https://www.flhsmv.gov/safety-center/consumer-education/buying-vehicle-florida/buying-licensed-dealer (last 
visited Dec. 5, 2023); Or. Dep't of Just., ``Buying a Vehicle,'' 
https://www.doj.state.or.us/consumer-protection/motor-vehicles/buying-a-vehicle/ (last visited Dec. 5, 2023).
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    While some commenters stated that existing Federal and State 
efforts are sufficient, recent Commission and partner actions indicate 
that misconduct has persisted despite prior law enforcement and other 
efforts, and despite the NPRM's detailed description of chronic 
problems relating to bait-and-switch tactics and hidden add-on and 
other charges. For example, in a recent enforcement action, filed after 
publication of the NPRM, the Commission charged several auto dealer 
locations in an auto dealership group with misrepresenting the price of 
vehicles. According to the complaint, the dealers advertised one price 
to lure consumers to their dealerships, then charged them hundreds to 
thousands of dollars more than the advertised price by tacking on bogus 
extra fees for inspection, reconditioning, preparation, and 
certification.\101\ The action also addressed the practice of dealers 
charging Black and Latino consumers these fees more often and in higher 
amounts.\102\
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    \101\ Complaint ] 17, Fed. Trade Comm'n v. Passport Auto. Grp., 
Inc., No. 8:22-cv-2670 (D. Md. Oct. 18, 2022).
    \102\ Id. ] 18. Recent actions outside the auto marketplace, 
even in transactions that may not be as complex and time consuming 
as motor vehicle transactions, further illustrate unfair and 
deceptive practices related to advertising, add-ons, and hidden 
charges. In one such action, the court noted ``the realities of the 
disparate bargaining power'' between the corporate defendant and its 
customers, adding that customers ``might have believed the [add-on] 
fees were mandatory,'' and ``might not have had the time'' to 
negotiate or complain about them. Fed. Trade Comm'n v. FleetCor 
Techs., Inc., 1:19-cv-5727, 2022 WL 3350066, at *13 (N.D. Ga. Aug. 
9, 2022) (granting the Commission's motion to exclude the 
defendant's expert testimony); see also Fed. Trade Comm'n v. 
FleetCor Techs., Inc., 620 F. Supp. 3d 1268, 1337 (N.D. Ga. 2022) 
(finding on summary judgment that (1) defendants did not tell 
consumers about fees at sign-up; (2) disclosures about fees in 
contractual documents were inadequate; and (3) defendants failed to 
get consent to add-on charges); id. at 1334 (concluding that 
defendants had ``charged a slew of fees that: were never 
discoverable to customers [and] were obscured by undecipherable 
language''); Complaint ]] 41-43, Fed. Trade Comm'n v. Harris 
Originals of NY, Inc., No. 2:22-cv-4260 (E.D.N.Y. July 20, 2022) 
(alleging that a jewelry company charged military consumers for add-
on products without their consent or under false pretenses); 
Complaint ]] 61-73, Fed. Trade Comm'n v. Benefytt Techs., Inc., No. 
8:22-cv-1794 (M.D. Fla. Aug. 8, 2022) (alleging illegal add-on 
charges by healthcare companies); Complaint ]] 1-4, Fed. Trade 
Comm'n v. First Am. Payment Sys., LP, No. 4:22-cv-654 (E.D. Tex. 
July 29, 2022) (alleging that a payment processing company 
misrepresented the terms and costs of its services, resulting in 
unexpected and unauthorized fees); Fed. Trade Comm'n, Notice of 
Proposed Rulemaking, Trade Regulation Rule on Unfair or Deceptive 
Fees, 88 FR 77420, 77435-37 (released Oct. 11, 2023; published Nov. 
9, 2023), https://www.govinfo.gov/content/pkg/FR-2023-11-09/pdf/2023-24234.pdf.

    Multiple actions by partners since publication of the Commission's 
NPRM have involved auto add-ons. The Commission and the State of 
Wisconsin alleged that a dealership group, its current and former 
owners, and its general manager deceived consumers by tacking on 
hundreds or even thousands of dollars for add-ons without those 
consumers' authorization or by leading the consumers to believe the 
add-ons were mandatory, and doing so disproportionately more frequently 
with American Indian customers.\103\ The CFPB and the New York State 
Office of the Attorney General alleged that a subprime auto lender knew 
or recklessly disregarded that dealers were tricking borrowers into 
purchasing add-on products without their knowledge or consent and had 
incentivized such behavior.\104\ In addition, the Commonwealth of 
Massachusetts has brought two recent cases involving unfair add-on 
pricing practices.\105\ In one such case, Massachusetts emphasized the 
dynamics of auto transactions that frequently lead to deceptive and 
unfair practices, particularly with respect to add-ons, noting that 
add-on products ``are often sprung on consumers in the final steps of 
completing a transaction'' after ``multiple rounds of negotiation on 
the price of a car and/or car financing.'' \106\
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    \103\ Complaint ]] 3-5, 11-18, 33-43, 48-51, Fed. Trade Comm'n 
v. Rhinelander Auto Ctr., Inc., No. 3:23-cv-00737 (W.D. Wis. Oct. 
24, 2023).
    \104\ Complaint ]] 128-30, CFPB v. Credit Acceptance Corp., No. 
1:23-cv-38 (S.D.N.Y. Jan. 4, 2023).
    \105\ Complaint ] 3, Massachusetts v. Jaffarian's Serv., Inc., 
No. 2277-cv-881 (Mass. Super. Ct. Sept. 15, 2022); Assurance of 
Discontinuance ]] 7-9, In re Hometown Auto Framingham, Inc., No. 
2384-cv-116 (Mass. Super. Ct. Jan. 17, 2023).
    \106\ Complaint ] 5, Massachusetts v. Jaffarian's Serv., Inc., 
No. 2277-cv-881 (Mass. Super. Ct. Jan. 17, 2023).
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    Efforts to combat deceptive and unfair practices in the motor 
vehicle industry since the NPRM have gone beyond enforcement actions. 
The CFPB announced that it uncovered several unlawful practices through 
supervisory examinations, including auto loan servicers charging for 
add-ons that provide no benefit to the consumer \107\ and failing to 
ensure consumers received refunds for add-on products that no longer 
offered any benefits.\108\ In addition, the State of California enacted 
new legislation that regulates a particular type of add-on product--GAP 
agreements.\109\ A press release introducing the legislation cited 
concerns about unfair practices in the sale of GAP agreements, stating 
that this add-on has little value and is often targeted at consumers 
with lower incomes and subprime credit.\110\ California's law requires 
several disclosures related to GAP agreements, including disclosures 
pertaining to their financed cost and informing consumers that such 
products are optional.\111\ The law also prohibits the sale of GAP 
agreements that will not actually cover consumers' debt.\112\
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    \107\ Consumer Fin. Prot. Bureau, ``Supervisory Highlights: 
Issue 24, Summer 2021'' 3-4 (June 2021), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-24_2021-06.pdf (finding servicers added and 
maintained unnecessary collateral protection insurance (CPI) when 
consumers had adequate insurance and thus the CPI provided no 
benefit to the consumers, and also when consumers' vehicles had been 
repossessed even though no actual insurance protection was provided 
after repossession).
    \108\ Consumer Fin. Prot. Bureau, ``Supervisory Highlights: 
Issue 28, Fall 2022'' 4-5 (Nov. 2022), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf (finding consumers paid off their 
vehicle financing early but servicers failed to ensure consumers 
received refunds for unearned fees related to add-on products which 
no longer offered any possible benefit to consumers after payoff).
    \109\ Cal. Civ. Code 2982.12.
    \110\ Press Release, Off. of the Att'y Gen. of Cal., ``Attorney 
General Bonta and Assemblymember Maienschein Announce Legislation to 
Strengthen Protections for Car Buyers'' (Feb. 16, 2022), https://oag.ca.gov/news/press-releases/attorney-general-bonta-and-assemblymember-maienschein-announce-legislation.
    \111\ Cal. Civ. Code 2982.12.
    \112\ Id.
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    Despite the array of actions by the Commission and its partners, 
unfairness and deception continue in the motor vehicle marketplace, 
including (1) deceptive or unfair sales and advertising tactics and (2) 
hidden charges, particularly with respect to add-on products or 
services. To address the harm these issues inflict on consumers and on 
law-abiding dealers, the Final Rule, in general:
    <bullet> Prohibits dealers from making misrepresentations regarding 
material information, including about the cost of the vehicle, the 
financing terms, and the availability of rebates or discounts;
    <bullet> Requires dealers to disclose the offering price of the 
vehicle--its full cash price, provided that dealers may exclude 
required government charges; that optional add-ons are not required; 
the total of payments for the vehicle when making a representation 
about monthly payment; and that a discussed lower monthly payment will 
increase

[[Page 601]]

the total amount the consumer will pay, if true;
    <bullet> Prohibits dealers from charging for add-on products or 
services that provide no benefit to the consumer; and
    <bullet> Requires dealers to obtain express, informed consent from 
the consumer for any charge.
    As discussed in the section-by section analysis in SBP III and in 
response to comments, the Commission is declining to finalize certain 
provisions proposed in the NPRM, including the provision that dealers 
must disclose a list of prices for all optional add-on products or 
services, and the provision that dealers must obtain certain signed 
declinations from consumers prior to charging for optional add-on 
products or services. The Commission also is finalizing the defined 
terms ``Covered Motor Vehicle'' and ``Covered Motor Vehicle Dealer'' to 
reflect edits to narrow the scope of these definitions compared to the 
scope of the terms ``Motor Vehicle'' and ``Motor Vehicle Dealer'' in 
the NPRM.

III. Section-by-Section Analysis

    The following discussion provides a section-by-section analysis 
that states the provisions proposed in the NPRM, and discusses the 
comments received, the Commission's responses to comments, and the 
provisions adopted in the Final Rule.\113\
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    \113\ Regarding the thousands of comments received, the 
Commission notes that many commenters raised similar concerns or 
addressed overlapping issues. To avoid repetition, the Commission 
has endeavored to respond to issues raised in similar comments 
together. Responses provided in any given section apply equally to 
comments addressing the same subject in the context of other 
sections. Moreover, throughout the SBP, the Commission discusses 
justifications for the Final Rule that are informed by its careful 
consideration of all comments received, even where that discussion 
is not linked to a particular comment.
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A. Sec.  463.1: Authority

    Section 463.1 states that the Final Rule is promulgated pursuant to 
section 1029 of the Dodd-Frank Act, and that it is an unfair or 
deceptive act or practice within the meaning of section 5(a)(1) of the 
FTC Act to violate, directly or indirectly, any provision of the Final 
Rule, including the recordkeeping requirements, which are necessary to 
prevent such unfair or deceptive acts or practices and to enforce this 
Rule.\114\ The prohibition against violating any applicable provision 
``directly or indirectly'' applies to each section of part 463. As 
discussed in SBP I.A, section 1029 authorizes the FTC to prescribe 
rules under Sections 5 and 18(a)(1)(B) of the FTC Act with respect to 
motor vehicle dealers predominantly engaged in the sale and servicing 
of motor vehicles, the leasing and servicing of motor vehicles, or 
both.\115\

[[Page 602]]

The Final Rule defines with specificity certain unfair or deceptive 
acts or practices; the Final Rule provisions are also ``prescribed for 
the purpose of preventing such acts or practices.'' \116\
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    \114\ The proposed authority provision in the NPRM omitted the 
second reference to ``unfair'' acts or practices with regard to the 
proposed recordkeeping requirements; the Final Rule consistently 
refers to both ``unfair'' and ``deceptive'' acts or practices 
together.
    \115\ One industry group argued that the proposed rule violated 
the APA because it did not comply with the FTC's rule requiring 
publication of an Advance Notice of Proposed Rulemaking (``ANPR''), 
16 CFR 1.10. Section 1.10, however, like the rest of subpart B of 
part 1 of the Commission's Rules of Practice, applies only to 
``proceedings for the promulgation of rules as provided in section 
18(a)(1)(B) of the Federal Trade Commission Act.'' 16 CFR 1.7. The 
ANPR requirement in section 1.10 implements section 18(b)(2) of the 
FTC Act, which requires an ANPR when the Commission promulgates 
rules under the procedures set forth in that section. In this case, 
the FTC is acting under statutory authority under section 1029(d) of 
the Dodd-Frank Act, see NPRM at 42031, which authorizes the 
Commission to promulgate rules using the APA's informal notice-and-
comment procedure, see 5 U.S.C. 553, notwithstanding the additional 
procedural requirements set forth in section 18. Accordingly, this 
rulemaking is governed by subpart C of part 1 of the Commission's 
Rules of Practice, which ``sets forth procedures for the 
promulgation of rules under authority other than section 18(a)(1)(B) 
of the FTC Act.'' 16 CFR 1.21. Neither subpart C nor the APA 
requires publication of an ANPR.
    This is consistent with Commission practice in prior notices to 
issue or amend regulations, including with the Made in USA Labeling 
Rule, the Children's Online Privacy Protection Act Rule, and the 
Telemarketing Sales Rule. See, e.g., Fed. Trade Comm'n, Notice of 
Proposed Rulemaking, Made in USA Labeling Rule, 85 FR 43162 (July 
16, 2020), https://www.govinfo.gov/content/pkg/FR-2020-07-16/pdf/2020-13902.pdf (issuing original notice of proposed rulemaking that 
was not preceded by an advance notice of proposed rulemaking); Fed. 
Trade Comm'n, Notice of Proposed Rulemaking, Children's Online 
Privacy Protection Rule, 64 FR 22750 (Apr. 27, 1999), https://www.govinfo.gov/content/pkg/FR-1999-04-27/pdf/99-10250.pdf (same); 
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing 
Sales Rule, 60 FR 8313 (Feb. 14, 1995), https://www.govinfo.gov/content/pkg/FR-1995-02-14/pdf/95-3537.pdf (same); Fed. Trade Comm'n, 
Notice of Proposed Rulemaking, Telemarketing Sales Rule, 78 FR 41200 
(July 19, 2013), https://www.govinfo.gov/content/pkg/FR-2013-07-09/pdf/2013-12886.pdf (issuing notice of proposed rulemaking for rule 
amendment that was not preceded by an advance notice of proposed 
rulemaking); Fed. Trade Comm'n, Proposed Rule, Children's Online 
Privacy Protection Rule, 76 FR 59804 (Sept. 27, 2011), https://www.govinfo.gov/content/pkg/FR-2011-09-27/pdf/2011-24314.pdf (same); 
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing 
Sales Rule, 74 FR 41988 (Aug. 19, 2009), https://www.govinfo.gov/content/pkg/FR-2009-08-19/pdf/E9-19749.pdf (same); Fed. Trade 
Comm'n, Notice of Proposed Rulemaking, Children's Online Privacy 
Protection Rule, 70 FR 2580 (Jan. 14, 2005), https://www.govinfo.gov/content/pkg/FR-2005-01-14/pdf/05-877.pdf (same); 
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Telemarketing 
Sales Rule, 69 FR 67287 (Nov. 17, 2004), https://www.govinfo.gov/content/pkg/FR-2004-11-17/pdf/04-25470.pdf (same); Fed. Trade 
Comm'n, Notice of Proposed Rulemaking, Telemarketing Sales Rule, 69 
FR 7330 (Feb. 13, 2004), https://www.govinfo.gov/content/pkg/FR-2004-02-13/pdf/04-3287.pdf (same); Fed. Trade Comm'n, Notice of 
Proposed Rulemaking, Telemarketing Sales Rule, 67 FR 4492 (Jan. 30, 
2002), https://www.govinfo.gov/content/pkg/FR-2002-01-30/pdf/02-1998.pdf (same); Fed. Trade Comm'n, Notice of Proposed Rulemaking, 
Children's Online Privacy Protection Rule, 66 FR 54963 (Oct. 31, 
2001), https://www.govinfo.gov/content/pkg/FR-2001-10-31/pdf/01-27390.pdf (same). This is also true of regulation amendments 
pursuant to the authority under which this Final Rule is 
promulgated--that which Congress granted to the Commission under 
section 1029 of the Dodd-Frank Act, 15 U.S.C. 5519, pertaining to 
motor vehicle dealers. See, e.g., Fed. Trade Comm'n, Notice of 
Proposed Rulemaking, Used Motor Vehicle Trade Regulation Rule, 77 FR 
74746, 74748 (Dec. 17, 2012), https://www.govinfo.gov/content/pkg/FR-2012-12-17/pdf/2012-29920.pdf (``Because the Dodd-Frank Act 
authorized the Commission to use APA procedures for notice and 
public comment in issuing or amending rules with respect to motor 
vehicle dealers, the FTC will not use the procedures set forth in 
Section 18 of the FTC Act, 15 U.S.C. 57a, with respect to these 
proposed revisions to the Used Car Rule and the Used Car Buyers 
Guide. Accordingly, the Commission is publishing this Notice of 
Proposed Rulemaking pursuant to Section 553 of the APA.''); see also 
Fed. Trade Comm'n, Notice of Proposed Rulemaking, Privacy of 
Consumer Financial Information Rule Under the Gramm-Leach-Bliley Act 
(``Privacy Rule''), 84 FR 13150 (Apr. 4, 2019), https://www.govinfo.gov/content/pkg/FR-2019-04-04/pdf/2019-06039.pdf 
(issuing notice of proposed rulemaking for rule amendment that was 
not preceded by an advance notice of proposed rulemaking).
    This same commenter argued the FTC had not complied with the 
``Principles of Regulation'' enumerated in section 1(b) of Executive 
Order 12866. See Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-
2022-0046-8368 at 34-36 & n.123; E.O. 12866 3(b) (defining 
``Agency'' to mean an authority of the United States ``other than 
those considered to be independent regulatory agencies''). This 
provision of the Executive Order does not apply to independent 
agencies such as the FTC. Regardless, the Commission did take into 
account the principles set forth in section 1(b), as is evident 
throughout the NPRM. See, e.g., NPRM at 42015-17 (identifying 
problems in the marketplace); id. at 42028-42031 (soliciting 
comments on alternative approaches); id. at 42036-42044 (assessing 
costs and benefits).
    The same commenter also argued that the Commission's denial of 
its request to extend the comment period prejudiced the commenter's 
ability to collect and provide data pertaining to the proposed rule 
and was inconsistent with the Commission's grant of extensions in 
other rulemakings. As described in its letter, the Commission also 
received requests opposing an extension of the comment period. See 
Letter, Fed. Trade Comm'n, ``Duration of the Public Comment Period 
in Matter No. P204800'' (Aug. 23, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/Matter%20No.%20204800%20-%20Letter%20re%20Extension%20for%20publication.pdf. In the letter, 
the Commission noted its ongoing engagement with stakeholders on 
issues relating to the sale, financing, and lease of motor vehicles, 
since before its 2011 Federal Register notice inviting stakeholder 
feedback on these issues and continuing since that time. See Fed. 
Trade Comm'n, Public Roundtables: Protecting Consumers in the Sale 
and Leasing of Motor Vehicles, 76 FR 14,014 (Mar. 15, 2011), https://www.federalregister.gov/documents/2011/03/15/2011-5873/public-roundtables-protecting-consumers-in-the-sale-and-leasing-of-motor-vehicles. The Commission determined that a sixty-day comment period, 
along with an additional twenty days following the public 
announcement and release of the NPRM and prior to its publication in 
the Federal Register, provided meaningful opportunity to comment. 
See also Steven J. Balla, ``Public Commenting on Federal Agency 
Regulations: Research on Current Practices and Recommendations to 
the Administrative Conference of the United States'' App. A (2011), 
https://www.acus.gov/sites/default/files/documents/Consolidated-Reports-%2B-Memoranda.pdf (reporting data from a pool of 703 comment 
periods associated with actions by dozens of Federal agencies, and 
finding that the average duration of comment periods for proposed 
agency actions was 38.7 days, and 45.1 days for actions that are 
economically significant).
    \116\ 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' unfair or 
deceptive acts or practices).
---------------------------------------------------------------------------

B. Sec.  463.2: Definitions

1. Overview
    The proposed rule included definitions for the following terms: 
``Add-on'' or ``Add-on Product(s) or Service(s)''; ``Add-on List''; 
``Cash Price without Optional Add-ons''; ``Clearly and Conspicuously''; 
``Dealer'' or ``Motor Vehicle Dealer''; ``Express, Informed Consent''; 
``GAP Agreement''; ``Government Charges''; ``Material'' or 
``Materially''; ``Motor Vehicle''; and ``Offering Price.'' In the 
definition-by-definition analysis in SBP III.B.2, the Commission 
discusses each definition proposed in the NPRM, relevant comments that 
are not otherwise addressed in the discussion of the corresponding 
substantive provisions of the Final Rule, and the definition the 
Commission is finalizing.
2. Definition-by-Definition Analysis
(a) Add-On or Add-On Product(s) or Service(s)
    The proposed rule defined ``Add-on'' or ``Add-on Product(s) or 
Service(s)'' as ``any product(s) or service(s) not provided to the 
consumer or installed on the vehicle by the motor vehicle manufacturer 
and for which the Motor Vehicle Dealer, directly or indirectly, charges 
a consumer in connection with a vehicle sale, lease, or financing 
transaction.'' This term appeared in the following definitions and 
substantive provisions of the rule proposal: the definitions of ``Add-
on List'' and ``Cash Price without Optional Add-ons''; the Prohibited 
Misrepresentations provision at proposed Sec.  463.3(b); the add-on 
list disclosure provision at proposed Sec.  463.4(b); the requirement 
to disclose that add-ons are not required at proposed Sec.  463.4(c); 
the prohibition against charging for add-ons that provide the consumer 
no benefit at proposed Sec.  463.5(a); and the proposed provision 
relating to undisclosed or unselected add-ons at Sec.  463.5(b). As 
discussed in the following paragraphs, in response to stakeholder 
comments, the Commission declines to finalize certain of these 
provisions; in the Final Rule, this term appears in paragraph (a) of 
the Prohibited Misrepresentations section (Sec.  463.3); the Disclosure 
Requirements provision in paragraph (c) of Sec.  463.4; and the 
provision in Sec.  463.5(a) titled ``Dealer Charges for Add-ons and 
Other Items'' and subtitled ``Add-ons that provide no benefit.''
    For the following reasons, the Commission adopts the definition of 
``Add-on'' or ``Add-on Product(s) or Service(s)'' largely as proposed, 
with conforming modifications to reflect changes to the defined terms 
```Covered Motor Vehicle' or `Vehicle''' and ```Covered Motor Vehicle 
Dealer' or ``Dealer''' as described in more detail in the discussion of 
Sec.  463.2(e) and (f), in SBP III.B.2(e) and (f).
    The Commission received several comments relating to the scope of 
its proposed definition for ``Add-on'' or ``Add-on Product(s) or 
Service(s).'' Industry association and other commenters recommended 
that the Commission broaden the definition to include manufacturer-
provided products or services, expressing concern that exclusion of 
such products or services would put other companies that provide such 
items at a competitive disadvantage. Products or services provided by 
manufacturers, however, are already covered by several provisions of 
the Final Rule. Under the substantive provisions the Commission is 
finalizing, dealers are prohibited from making misrepresentations 
regarding material information, including about the ``costs or terms of 
purchasing, financing, or leasing a Vehicle'' (Sec.  463.3(a)); must 
disclose the vehicle's true ``Offering Price,'' which includes any 
amounts dealers charge for items already installed or provided by the 
manufacturer (Sec. Sec.  463.4(a) and 463.2(k)); and are required to 
obtain ``Express, Informed Consent'' for charges for any item 
(Sec. Sec.  463.5(c) and 463.2(g)). The additional substantive add-on-
specific provisions \117\ address harms associated with products or 
services not provided to the consumer or installed on the vehicle by 
the motor vehicle manufacturer. Commenters did not provide evidence 
that the proposed provisions covering manufacturer-provided products or 
services would be insufficient to address consumer harm. Accordingly, 
the Commission has determined not to include manufacturer-provided 
products or services within this defined term. The Commission will 
continue to monitor this issue to determine whether additional action 
is warranted.
---------------------------------------------------------------------------

    \117\ Sec. Sec.  463.3(b), 463.4(c), 463.5(a).
---------------------------------------------------------------------------

    One individual commenter expressed concern that, under the 
Commission's proposed definition, dealers could raise the price of a 
vehicle by advertising additional products or services, such as ``free 
lifetime benefits'' with the vehicle, and that dealers could mislead 
consumers by charging more for the vehicle based on a supposedly 
``free'' add-on.\118\ The Commission notes that the Rule the Commission 
is finalizing contains several provisions relating to this concern. For 
example, dealers are prohibited from making misrepresentations under 
Sec.  463.3, including misrepresentations regarding ``costs, 
limitation, benefit, or any other aspect'' of add-ons.\119\ 
Furthermore, dealers are required to disclose a vehicle's offering 
price, which must include charges for required add-ons; this disclosure 
will allow consumers to know the true price of the vehicle and 
comparison shop before selecting and visiting a particular 
dealership.\120\
---------------------------------------------------------------------------

    \118\ Individual commenter, Doc. No. FTC-2022-0046-7445 at 10-
11.
    \119\ Sec.  463.3(b) (emphasis added).
    \120\ See Sec. Sec.  463.2(k) (defining Offering Price), 
463.4(a) (requiring disclosure of Offering Price); see also Sec.  
463.3(p) (prohibiting misrepresentations regarding the disclosures 
required by the Final Rule).
---------------------------------------------------------------------------

    Several dealership association commenters expressed concern that 
the proposed definition was too broad, contending that it might apply 
to hundreds of items and include fees, such as a processing or document 
fee, that a dealer charges a consumer. As discussed in SBP III.B.2(b), 
III.D.2(b), and III.E.2(b), upon careful review of comments, including 
comments regarding the breadth of this requirement, the Commission has 
determined not to finalize the provision that would have required 
listing all optional add-ons--the ``Add-on List'' definition and the 
associated requirement that dealers disclose such a list--as well as 
proposed Sec.  463.5(b) relating to undisclosed or unselected add-
ons.\121\ The remaining substantive provisions that use the term ``Add-
ons'' prohibit misrepresentations (Sec.  463.3(b)); require dealers to 
disclose, if true, that add-ons are not required (Sec.  463.4(c)); and 
prohibit charges for add-ons that provide the consumer no benefit 
(Sec.  463.5(a)). The law already prohibits misrepresentations, 
regardless of the product or service at issue; dealers that offer 
consumers additional products or services are already required to ask

[[Page 603]]

consumers if they want such products, rather than suggesting that such 
products or services are mandatory, when they are not; and any hardship 
associated with refraining from charging for products or services that 
provide consumers no benefits are outweighed by the harms to consumers 
and competition from permitting this practice, as explained in the 
analysis of Sec.  463.5(a).
---------------------------------------------------------------------------

    \121\ See NPRM at 42044, 42046 (proposed Sec. Sec.  463.2(b), 
463.4(b), 463.5(b)).
---------------------------------------------------------------------------

    Commenters including an industry association suggested limiting the 
definition to products or services sold at the ``point of vehicle 
purchase'' to clarify that indirect charges, such as the inclusion of a 
one-year subscription to a satellite radio service, need not be 
separately itemized.\122\ The industry association commenter suggested 
that, as proposed, the definition would include charges for which 
dealers and consumers ``would otherwise not account.'' \123\ The 
Commission has determined not to finalize the add-on list and form 
requirements in proposed Sec. Sec.  463.4(b) and 463.5(b). For the 
provisions being finalized, excluding subscription charges, or 
including only items added to the vehicle at the ``point of vehicle 
purchase,'' would narrow the definition of ``Add-on'' and the 
corresponding requirements in a manner that would allow for deceptive 
or unfair practices, including by allowing dealers to represent a price 
that is not the offering price, or to deceptively state that add-ons 
are required. In the example provided by the commenter, if the 
satellite radio subscription service is mandatory, it needs to be 
included in the offering price of the vehicle, as required by Sec.  
463.4(a) of the Final Rule; if it is not mandatory, the dealer needs to 
disclose, when making any representations about the service, that it is 
not required under Sec.  463.4(c). Further, regardless of whether such 
a product or service is mandatory or optional, dealers must follow 
other aspects of the Final Rule, including by not making any 
misrepresentations about the subscription under Sec.  463.3 and by 
obtaining the express, informed consent of the consumer for the 
associated charges under Sec.  463.5(c).
---------------------------------------------------------------------------

    \122\ Comment of Serv. Cont. Indus. Council, Guaranteed Asset 
Prot. All., & Motor Vehicle Prot. Prods. Ass'n, Doc. No. FTC-2022-
0046-8113 at 13-14.
    \123\ Id. at 13.
---------------------------------------------------------------------------

    Another industry association commenter contended that add-ons sold 
in the marine industry are typically different than those offered in 
the context of automobile sales and described in the NPRM. While all 
motor vehicle dealers must refrain from engaging in deceptive or unfair 
conduct relating to add-ons, the Commission is excluding recreational 
boats and marine equipment from the Final Rule's definition of `` 
`Covered Motor Vehicle' or `Vehicle,' '' as discussed in additional 
detail in the definition-by-definition analysis of Sec.  463.2(e) in 
SBP III.B.2(e).
    An industry association commenter and comments from a number of 
dealership associations noted that certain State laws already regulate 
the sale of add-ons, including, for example, laws in many States that 
regulate vehicle sales contracts or deceptive sales practices generally 
or that regulate insurance products. To the extent that the Final 
Rule's add-on provisions may duplicate State law, commenters have 
provided no evidence that any such duplication in the provisions that 
incorporate this defined term--which prohibit misrepresentations, 
require disclosures in the event add-ons are not required, and prohibit 
charges for add-ons from which the consumer would not benefit--will 
harm consumers or competition. Moreover, the Final Rule provides 
additional remedies that will benefit consumers who encounter conduct 
that is already illegal under State or Federal law, including by adding 
a mechanism for the Commission to redress consumers injured by a 
dealer's violation of the rule, and will assist law-abiding dealers 
that presently lose business to competitors that act unlawfully. Under 
the Final Rule, State laws may provide more or less specific 
requirements as long as such requirements are not inconsistent with 
part 463, as set forth at Sec.  463.9, and in the event of an 
inconsistency, the Rule only affects such State law to the extent of 
the inconsistency.\124\
---------------------------------------------------------------------------

    \124\ See, e.g., English v. Gen. Elec. Co., 496 U.S. 72, 79 
(1990).
---------------------------------------------------------------------------

    A few dealership association commenters expressed concern that the 
proposed definition of ``Add-on Products or Services'' would include 
insurance-related products, such as credit life and credit disability 
insurance, and as such, could implicate the McCarran-Ferguson Act's 
reverse-preemption of certain Federal laws that ``invalidate, impair, 
or supersede'' State laws enacted ``for the purpose of regulating the 
business of insurance.'' \125\ Commenters have provided no evidence 
that the Rule will invalidate, impair, or supersede State laws enacted 
for the purpose of regulating the business of insurance.\126\ To the 
contrary, the Final Rule addresses deceptive or unfair conduct--it 
prohibits dealers, inter alia, from making misrepresentations regarding 
material information about add-ons, from failing to disclose when add-
ons are not required, and from charging for add-ons from which the 
consumer would not benefit. Nor has the Commission been presented with 
evidence that the Rule's other substantive provisions (prohibiting 
misrepresentations; requiring disclosures of a vehicle's offering price 
and about total of payments; and requiring consumers' express, informed 
consent before charging them) invalidate, impair, or supersede State 
laws enacted for the purpose of regulating insurance.\127\
---------------------------------------------------------------------------

    \125\ See 15 U.S.C. 1012(b).
    \126\ See Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 
(1982) (setting forth test for whether an activity constitutes the 
``business of insurance''); Humana Inc. v. Forsyth, 525 U.S. 299, 
307-08 (1999) (establishing criteria for whether a Federal law 
operates to ``invalidate, impair, or supersede'' State law).
    \127\ The Supreme Court has refused to interpret the McCarran 
Ferguson Act to invalidate Federal law when applied to remedy a 
misrepresentation and undo the harm caused by alleged deception. See 
SEC v. Nat'l Sec., Inc., 393 U.S. 453, 462 (1969). Moreover, lower 
courts have rejected precisely the concern raised by the commenter 
about credit life insurance. See Fed. Trade Comm'n. v. Dixie Fin. 
Co., 695 F.2d 926, 930 (5th Cir. 1983) (McCarran Ferguson Act does 
not preclude FTC investigation of ``whether the sale of insurance is 
a precondition to the arrangement of credit''); Fed. Trade Comm'n v. 
Mfrs. Hanover Consumer Servs., Inc., 567 F. Supp. 992, 94 (E.D. Pa. 
1983) (same).
---------------------------------------------------------------------------

    A number of industry and dealership association commenters 
contended that, as proposed, this definition may extend to products or 
services that are provided by the manufacturer but that are installed 
by a distributor of motor vehicles, or alternatively, by the dealer, at 
the instruction of the manufacturer. Relatedly, a State governmental 
association commenter expressed concern that the proposed definition 
could create confusion with regard to the sale of used vehicles, where 
a prior owner of a vehicle may have added a product to the vehicle. The 
commenter contended that a motor vehicle dealer selling the used 
vehicle may be unaware of the added product, and further, that listing 
any such items may confuse buyers.
    To the extent the commenters' concerns stem from the proposed 
provisions related to add-on lists and proposed Sec.  463.5(b)'s 
provisions related to separate disclosures, the Commission is not 
finalizing those provisions. Under the provisions being finalized, if a 
product is provided to the dealer by the manufacturer or another 
entity, and a consumer chooses to have the product

[[Page 604]]

installed and pay for it, the dealer may install it and charge for it, 
as long as the dealer complies with the provisions of the Final Rule, 
including by disclosing that the product is not required and by 
obtaining the consumer's express, informed consent for the charge. If 
the manufacturer requires the dealer to install the product or if the 
dealer chooses to install the product, and the dealer requires any 
consumer to pay charges for it, the amount of the charge must be 
included in the vehicle's offering price, and the dealer must comply 
with other aspects of the Final Rule, including the express, informed 
consent requirement. Relatedly, regarding used vehicles, if a prior 
owner of such a vehicle installed an add-on, and the dealer that 
subsequently sells such a vehicle requires any consumer to pay charges 
for the add-on, the amount of those charges must be included in the 
vehicle's offering price and the dealer must comply with other aspects 
of the Final Rule, including the express, informed consent requirement 
at Sec.  463.5(c). If, alternatively, the dealer does not require any 
consumers to pay for the pre-installed add-on, then the dealer does not 
have to add that amount to the vehicle's offering price, and there is 
no charge for that add-on for which the dealer must obtain express, 
informed consent. Thus, the definition of ``Add-on'' and the Rule 
requirements being finalized address deceptive or unfair price and add-
on disclosures and hidden charges without requiring dealers to list or 
itemize charges that they do not impose on consumers. For the reasons 
explained in this section, the Commission is finalizing the definition 
of ``Add-on'' or ``Add-on Product(s) or Service(s)'' largely as 
proposed, with conforming modifications to reflect changes to the 
defined terms ```Covered Motor Vehicle' or `Vehicle''' and ```Covered 
Motor Vehicle Dealer' or `Dealer''' as described in more detail in the 
discussion of Sec.  463.2(e) and (f), in SBP III.B.2(e) and (f).
(b) Add-On List
    The NPRM proposed defining the term ``Add-on List,'' which appeared 
in the associated Add-on List disclosure provision at proposed Sec.  
463.4(b), as well as in the recordkeeping provision at proposed Sec.  
463.6(a)(2). Based on the following, the Commission has determined not 
to include this definition in its Final Rule.
    Several commenters supported the substantive add-on list proposal 
and its associated definition, and commenters including consumer 
advocacy organizations urged the Commission to finalize additional 
related restrictions or disclosures, such as requiring add-on prices to 
be fixed and non-negotiable, or requiring a distinct add-on list for 
each vehicle sold. Other commenters, including dealership associations, 
raised concerns that, as proposed, the add-on list definition could 
impose significant economic burdens on dealerships for a disclosure 
that, in some circumstances, might be too voluminous to be optimally 
meaningful to consumers, or permit price ranges that could be too broad 
to prevent abuses and effectively inform consumers.
    After careful consideration, and in light of the concerns raised by 
commenters, the Commission has determined not to include the add-on 
list disclosure provision at proposed Sec.  463.4(b) or the 
recordkeeping provision at proposed Sec.  463.6(a)(2) in its Final 
Rule, and therefore will not include a definition of the term ``Add-on 
List'' in its Final Rule. Here, as elsewhere, the Commission remains 
committed to promoting fair, non-deceptive, and competitive markets for 
consumer products and services; it will continue to monitor the 
marketplace for add-on-related acts or practices that are unfair or 
deceptive, and will evaluate whether to propose additional measures 
pertaining to such products and services.
(c) Cash Price Without Optional Add-Ons
    The NPRM proposed defining the term ``Cash Price without Optional 
Add-ons,'' which appeared in the proposed provision addressing 
undisclosed or unselected add-ons at Sec.  463.5(b). Based on the 
following, the Commission is declining to finalize this definition.
    A number of commenters favored the proposed provision and 
definition, and several, including consumer advocacy organizations, 
urged the Commission to include additional requirements, such as 
requiring the proposed disclosure documents associated with this 
proposed definition to be available in different languages, while 
others, including a dealership association, raised concerns that the 
definition and relevant provision were burdensome or confusing for 
dealers.
    As explained in additional detail in SBP III.E.2(b) with respect to 
Sec.  463.5(b), in light of commenter concerns that the proposed 
provision using this term would increase costs for legitimate dealers 
and add to the time and paperwork for consumers in an already lengthy, 
paperwork-heavy transaction, the Commission has elected not to include 
a Cash Price without Optional Add-ons disclosure requirement in its 
Final Rule. Thus, after careful consideration, and in light of the 
concerns raised by commenters, the Commission has determined not to 
include a definition of ``Cash Price without Optional Add-ons'' in its 
Final Rule.
(d) Clearly and Conspicuously
    The proposed rule defined the term ``Clearly and Conspicuously'' as 
``in a manner that is difficult to miss (i.e., easily noticeable) and 
easily understandable,'' including in all of seven enumerated ways, 
listing proposed requirements for ``any communication that is solely 
visual or solely audible,'' ``[a] visual disclosure,'' ``[a]n audible 
disclosure,'' and ``any communication using an interactive electronic 
medium,'' and providing, inter alia, that such disclosures ``must use 
diction and syntax understandable to ordinary consumers and must appear 
in each language in which the representation that requires the 
disclosure appears'' and ``must not be contradicted or mitigated by, or 
inconsistent with, anything else in the communication.'' Based on the 
following, the Commission is finalizing this definition largely as 
proposed, with a modification to clarify that the definition applies 
whether the term appears as an adjective or an adverb, by adding the 
parentheses in the following manner to the defined term: ``Clear(ly) 
and Conspicuous(ly).''
    Some consumer advocacy organization commenters favored the 
Commission's proposed definition while also suggesting that the 
Commission include a provision requiring translation of any deal 
consummating documents, including buyer's orders and retail installment 
sales contracts, into the language in which the negotiations were 
conducted. This issue, however, is addressed by Sec.  463.5(c) of the 
Rule, which requires express, informed consent for each item 
charged.\128\ As explained in additional detail in the paragraph-by-
paragraph analysis of Sec.  463.5(c) in SBP III.E.2(c), if a deal-
consummating document is provided in a language that the consumer does 
not understand, and the document's contents are not otherwise clearly 
understood by the consumer, then the consumer is in no position to give 
unambiguous assent to the charges described therein. The Commission 
therefore has determined not to add

[[Page 605]]

such a provision to its ``Clear(ly) and Conspicuous(ly)'' definition. 
However, the Commission will continue to monitor the marketplace and 
determine whether further language requirements or additional measures 
are warranted to address deceptive or unfair practices--particularly 
those that target or otherwise disproportionately impact language-
minority communities.
---------------------------------------------------------------------------

    \128\ The language requirements, as they relate to obtaining 
express, informed consent, are further explained in the discussion 
of Sec.  463.5(c) in SBP III.E.2(c).
---------------------------------------------------------------------------

    Commenters, including consumer advocacy organizations, expressed 
concern that proposed Sec.  463.2(d)(5) may be read to apply only to 
certain disclosures with triggering representations and only to 
disclosures that are in writing. These commenters also requested that 
the Commission incorporate into its Final Rule the FTC's policy 
statement regarding foreign language advertising and sales materials, 
which is separately codified at 16 CFR 14.9.\129\ In response, the 
Commission notes that to be clear and conspicuous, the disclosure must 
be ``easily understandable,'' as stated in the definition. If a 
disclosure is being made in a language the consumer does not 
understand, it does not meet this requirement. Further, the disclosures 
highlighted by the commenters are indeed subject to the language 
requirements of Sec.  463.2(d)(5), which requires that disclosures 
``appear in each language in which the representation that requires the 
disclosure appears.'' With regard to the offering price disclosure in 
Sec.  463.4(a)(1), the applicable ``representation that requires the 
disclosure'' is the ``advertisement that references . . . a specific 
Vehicle''; thus, for example, if an advertisement that references a 
specific vehicle is in Spanish, the offering price disclosure must also 
be in Spanish. Similarly, in Sec.  463.4(a)(2), the applicable 
representation that requires the disclosure is an ``advertisement that 
represents . . . any monetary amount or financing term for any 
Vehicle.'' In Sec.  463.4(a)(3), the applicable representation is ``any 
communication . . . that includes a reference . . . regarding a 
specific Vehicle, or any monetary amount or financing term for any 
Vehicle.'' In Sec.  463.4(c) and (d), ``any representation'' regarding 
an add-on product or service or a monthly payment for any vehicle, 
respectively, triggers the language requirement of Sec.  463.2(d)(5). 
The monthly payments comparison disclosure in Sec.  463.4(e) is 
required when there is a ``comparison between payment options . . . 
that includes discussion of a lower monthly payment.'' Thus, the 
language requirements in Sec.  463.2(d)(5) apply.
---------------------------------------------------------------------------

    \129\ 16 CFR 14.9 is an enforcement policy statement that 
provides information to advertisers about clear and conspicuous 
disclosures in foreign language advertisings and sales materials, 
including ensuring the language of the disclosure matches the 
language in the publication. See 16 CFR 14.9.
---------------------------------------------------------------------------

    In response to this concern regarding the applicability of Sec.  
463.2(d)(5) to disclosures that are not in writing, the Commission 
notes that its use of the word ``appear'' in Sec.  463.2(d)(5) 
incorporates common meanings, such as ``to show up,'' ``to come into 
existence,'' or ``to become evident or manifest,'' which cause this 
provision to apply whether the representation requiring the disclosure 
appears visually, orally, or otherwise.\130\ Where the Commission 
instead intended a provision to be limited to a visual disclosure, as 
in Sec.  463.2(d)(2), the Rule states so explicitly.
---------------------------------------------------------------------------

    \130\ See Appear (defs. 1b, 4, 6), Merriam-Webster.com 
Dictionary, https://www.merriam-webster.com/dictionary/appear (last 
visited Dec. 5, 2023); see also Order ]] 2-3, Asbury Auto. Grp., 
Inc., No. C-4606 (F.T.C. Mar. 22, 2017) (identical usage in 
definition provision); Order ] 2, Lithia Motors, Inc., No. C-4597 
(F.T.C. Dec. 8, 2016) (same); Order ]] 2-3, Jim Koons Mgmt. Co., No. 
C-4598 (F.T.C. Dec. 8, 2016) (same).
---------------------------------------------------------------------------

    In response to the request that the Commission incorporate into 
this Rule its policy statement regarding foreign language advertising 
and sales materials, separately codified at 16 CFR 14.9, the Commission 
emphasizes that the enforcement statement sets out what is already 
impermissible under current law and is consistent with the requirements 
the Commission is finalizing. To the extent dealers take actions that 
are inconsistent with Commission statements about such law, they are 
risking enforcement proceedings by the Commission or others. 
Accordingly, the Commission has determined not to add to the Rule 
further requirements regarding foreign language advertising. The 
Commission will continue to monitor the market to determine whether 
further action is warranted.
    Industry association commenters raised concerns about how the 
Commission's proposed definition interacts with other Federal laws, 
such as Regulations Z and M, which implement the Truth in Lending Act 
and the Consumer Leasing Act, respectively, and contended that it 
conflicts with a clear and conspicuous definition in Commodity Futures 
Trading Commission regulations.\131\ Industry and dealership 
association commenters contended that State advertising standards 
already address what constitutes ``clear and conspicuous'' advertising 
and provide guidance on disclosures, such that the FTC's proposal will 
cause confusion or possible conflict with State law.
---------------------------------------------------------------------------

    \131\ 17 CFR 162.2.
---------------------------------------------------------------------------

    The Commission's definition of ``Clear(ly) and Conspicuous(ly)'' is 
not inconsistent with the existing Federal legal requirements raised by 
these commenters. Dealers can comply with these laws to the extent they 
apply as well as with the requirements that follow from the 
Commission's definition. Regarding State law, commenters did not 
provide examples of actual conflicts. Further, to the extent there is 
truly an inconsistency between the operation of the Commission's 
definition and any State law, the Commission notes that the definition 
is based on decades of Commission experience policing deceptive and 
unfair conduct; addresses harmful practices including those related to 
hidden disclosures and charges; and that Sec.  463.9 of the Final Rule 
sets out the Rule's relation to State laws.
    Other industry association commenters also contended that the 
proposed definition of ``Clearly and Conspicuously'' would be overly 
broad and challenging for compliance, but did not explain why or 
suggest alternative language. In addition, some dealership association 
commenters requested more guidance to understand the definition. The 
Commission's definition spells out, in seven subparts, what clear and 
conspicuous means, using simple terms that provide additional 
information about how dealers can make a disclosure in a manner that is 
easily understandable and easily noticeable to the consumer. The 
definition elaborates basic, common-sense principles, including that 
visual disclosures be in a size that consumers will easily notice and 
that audible disclosures be in a volume, speed, and cadence such that 
consumers will easily hear it. Thus, for example, disclosures in an 
illegible font, or that consumers cannot hear, are not clear and 
conspicuous. The Commission also notes that it did not mandate specific 
fonts, volumes, or other prescriptive measures. Thus, dealers have the 
flexibility to determine the best way to meet the definition's 
requirements for their consumers under the circumstances.
    A dealership association commenter contended that the proposed 
definition does not include a reasonableness standard and may be 
interpreted as prohibiting any limitations and exclusions, given the 
requirement in proposed Sec.  462.3(d)(7) that a disclosure must not be 
contradicted or mitigated by or inconsistent with anything else in the 
communication. The commenter further asked whether a statement such as 
``with approved credit'' would

[[Page 606]]

impermissibly mitigate an offer of low financing under this proposed 
definition.\132\ The Commission responds as follows. The standard is an 
objective one, evaluated from the perspective of a reasonable 
consumer.\133\ The definition does not prohibit all advertising that 
contains limitations and exclusions, but it does provide that if 
dealers are advertising offers that are limited in some way, they may 
not misrepresent such offers. Thus, if a dealer presents consumers with 
an unqualified representation of low financing terms, those terms must 
be available to typical consumers. Alternatively, a dealer may offer 
low financing terms to consumers with particular credit characteristics 
if that requirement is presented in a manner that does not deceive 
reasonable consumers. For example, a dealer may offer ``0% annual 
percentage rate (APR) for consumers with a credit score above 800.'' By 
contrast, it would be deceptive if the dealer offered ``0% APR,'' and 
then separately disclosed in fine print that such terms are only 
available to consumers with a credit score above 800, because the 
qualifying disclosure is inconsistent with an offer of ``0% APR'' that 
contained no limitations and thus indicated that 0% APR is available to 
the typical consumer regardless of credit score.\134\ Further, the 
Commission notes that to qualify as clear and conspicuous, 
``disclaimers or qualifications in any particular ad are not adequate 
to avoid liability unless they are sufficiently prominent and 
unambiguous to change the apparent meaning of the claims and to leave 
an accurate impression. Anything less is only likely to cause confusion 
by creating contradictory double meanings.'' \135\
---------------------------------------------------------------------------

    \132\ Comment of Ohio Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-6657 at 4.
    \133\ See FTC Policy Statement on Deception, supra note 42, at 
2-5.
    \134\ Complaint ]] 5-7, Progressive Chevrolet Co., No. C-4578 
(F.T.C. June 13, 2016) (alleging ads touting attractive terms 
deceptively failed to disclose high credit score requirement).
    \135\ Removatron Int'l Corp. v. Fed. Trade Comm'n, 884 F.2d 
1489, 1496-97 (1st Cir. 1989); see also Fed. Trade Comm'n v. Brown & 
Williamson Tobacco Corp., 778 F.2d 35, 42-43 (D.C. Cir. 1985) 
(finding that a disclosure in virtually illegible form, placed in an 
inconspicuous corner of Barclay advertisements, did not eliminate 
deception); see Fed. Trade Comm'n v. Cap. Choice Consumer Credit, 
Inc., 2003 U.S. Dist. LEXIS 29086, at *5 (S.D. Fla. June 2, 2003) 
(finding that, where advertisements promised a general purpose 
credit card, such as VISA or MasterCard, ``fine print on reverse 
side'' of ad clarifying that the credit card was a ``merchandise 
card and not a major bank card'' was inadequate to modify net 
impression); Fed. Trade Comm'n v. Cyberspace.com LLC, 453 F.3d 1196, 
1200 (9th Cir. 2006) (rejecting defendant's argument that truthful 
fine print notices on reverse side of checks, invoices, and 
marketing inserts cured deception that check/invoice was a refund 
rather than offer for services); Fed. Trade Comm'n v. Alcoholism 
Cure Corp., No. 3:10-cv-266-J-34JBT, 2011 WL 13137951, at * 51 (M.D. 
Fla. Sept. 16, 2011) (finding that ``not MD'' disclaimers were 
inadequate to dispel net impression regarding professional 
qualifications of defendant and other employees as advertised); Fed. 
Trade Comm'n v. Wash. Data Res., 856 F. Supp. 2d 1247, 1274-75 (M.D. 
Fla. 2012) (rejecting defendants' argument that retainer agreement 
contained sufficient disclaimer to dispel a misrepresentation about 
whether a home loan was guaranteed).
---------------------------------------------------------------------------

    Lastly, another dealership association commenter asked how the 
proposed definition translates to visual, audible, and electronic media 
disclosures and expressed concern about subjectivity, characterizing 
the terms ``easily'' understood and ``unavoidable'' within the proposed 
definition as subjective and open to different interpretations, 
particularly in the context of websites and internet promotions. Here, 
the Commission declines to mandate more prescriptive language 
regarding, for example, font sizes, what volumes are to be used, and 
where exactly the language should appear on a website, such as on an 
overlay with mandated color, size, and location.\136\ As courts \137\ 
have recognized, whether a disclosure is clear and conspicuous is an 
objective standard rather than a subjective one. While more 
prescriptive language would provide additional objective criteria, the 
Commission is concerned such language might constrain dealers from 
determining the best way to meet the definition's requirements for 
their consumers under the circumstances involved, and might require 
dealers that are already making clear and conspicuous disclosures to 
change their existing disclosure materials.
---------------------------------------------------------------------------

    \136\ The Commission has included such requirements elsewhere. 
See, e.g., Order ] 6, United States v. Sunkey Publ'g, Inc., No: 
3:18-cv-1444-HNJ (N.D. Ala. Sept. 6, 2018).
    \137\ See. e.g., Palmer v. Champion Mortg., 465 F.3d 24, 28 (1st 
Cir. 2006) (applying an objective standard in evaluating Truth in 
Lending Act claim regarding clear and conspicuous disclosure); Smith 
v. Check-N-Go of Ill., Inc., 200 F.3d 511, 515 (7th Cir. 1999) 
(same); Zamarippa v. Cy's Car Sales, Inc., 674 F.2d 877, 879 (11th 
Cir. 1982) (same); Bustamante v. First Fed. Sav. & Loan Ass'n, 619 
F.2d 360, 364 (5th Cir. 1980) (same); see also Herrera v. First N. 
Sav. & Loan Ass'n, 805 F.2d 896, 900 (10th Cir. 1986) (resolving 
question of clear and conspicuous disclosure under Truth in Lending 
Act as a legal, rather than factual, matter); Dixey v. Idaho First 
Nat'l Bank, 677 F.2d 749 (9th Cir. 1982) (same).
---------------------------------------------------------------------------

    The Commission reiterates that the definition of ``Clear(ly) and 
Conspicuous(ly)'' elaborates basic, common-sense principles, such as 
requiring visual disclosures in a size consumers can see and audible 
disclosures in a volume they can hear. Regarding the requirement that 
internet disclosures be unavoidable, this language requires evaluating 
an objective standard--whether or not consumers could have avoided the 
disclosure. In addition, the disclosure must be easily noticeable and 
easily understandable, as set forth expressly in the definition. 
Disclosures that do not meet this standard include those that are 
buried in other text, including as illustrated by many FTC actions 
against dealers.\138\ Regarding the requirement that disclosures be 
``easily'' noticeable and understandable, the standard is also an 
objective one, evaluated from the perspective of a reasonable consumer. 
Determining how reasonable consumers are likely to respond may be 
resolved on the basis of the advertisement, context, or disclosure 
itself, or based on extrinsic evidence, such as consumer 
complaints.\139\ To this end, as noted previously, the definition 
enumerates in seven subparts the meaning of clear and conspicuous using 
simple terms that provide additional guidance on how dealers may make 
disclosures that are easily understandable and easily noticeable to the 
consumer.
---------------------------------------------------------------------------

    \138\ Complaint ]] 6-14, Jim Burke Auto., Inc., No. C-4523 
(F.T.C. May 4, 2015); Complaint ]] 6, 9, TT of Longwood, Inc., No. 
C-4531 (F.T.C. July 2, 2015); Complaint ] 13, City Nissan Inc., No. 
C-4524 (F.T.C. May 4, 2015); Complaint ]] 17-19, Fed. Trade Comm'n 
v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 
2020); Complaint ]] 4-9, 12-15, 18-20, Billion Auto, Inc., No. C-
4356 (F.T.C. May 1, 2012) (alleging false ads promising to pay off 
consumers' existing motor vehicle debt and failing to disclose 
legally required financing and leasing terms); see also Complaint ]] 
57-60, Fed. Trade Comm'n v. Stewart Fin. Co. Holdings, Inc., No. 
1:03-CV-2648 (N.D. Ga. Sept. 4, 2003) (alleging violations for 
failure to include the cost of required add-on products in the 
finance charge and annual percentage rate disclosed to consumers).
    \139\ See FTC Policy Statement on Deception, supra note 42, at 
2-5 (describing application of reasonable consumer standard).
---------------------------------------------------------------------------

    After carefully considering the comments, the Commission adopts 
Sec.  463.2(d) with a modification to clarify, through the addition of 
parentheses--``Clear(ly) and Conspicuous(ly)''--that the definition 
applies whether the term is used as an adjective or adverb. Consistent 
with the Commission's experience addressing unfair or deceptive 
conduct, the Commission has defined the term ``Clear(ly) and 
Conspicuous(ly)'' to include disclosures that are easily understandable 
and easily noticeable, while also providing dealers with additional 
information on how to meet those requirements.\140\
---------------------------------------------------------------------------

    \140\ See, e.g., Decision and Order, JS Autoworld, Inc., No. C-
4535 (F.T.C. Aug. 13, 2015); Decision and Order, Nat'l Payment 
Network, Inc., No. C-4521 (F.T.C. May 4, 2015); Decision and Order, 
Matt Blatt Inc., No. C-4532 (F.T.C. July 2, 2015); Decision and 
Order, Ganley Ford West, Inc., No. C-4428 (F.T.C. Jan. 28, 2014).

---------------------------------------------------------------------------

[[Page 607]]

(e) Motor Vehicle (Finalized as `` `Covered Motor Vehicle' or `Vehicle' 
'')
    The proposed rule defined the term ``Motor Vehicle'' as ``(1) any 
self-propelled vehicle designed for transporting persons or property on 
a street, highway, or other road; (2) Recreational boats and marine 
equipment; (3) Motorcycles; (4) Motor homes, recreational vehicle 
trailers, and slide-in campers, as those terms are defined in 
Sec. Sec.  571.3(b) and 575.103(d) of title 49, Code of Federal 
Regulations, or any successor thereto; and (5) Other vehicles that are 
titled and sold through Dealers.'' The Commission has determined to 
finalize the definition with the modifications discussed in the 
following paragraphs.
    The Commission received several comments regarding the substance 
and scope of this proposed definition. A number of industry association 
commenters requested that certain vehicle types, including marine 
vehicles, motorcycles, RVs, and other recreational vehicles be excluded 
from coverage. These commenters contended that the dealerships that 
sell such vehicles function differently from automobile dealerships, 
and that recreational vehicles are discretionary, rather than 
essential, purchases. After careful consideration, the Commission is 
excluding recreational boats and marine equipment; motorcycles; and 
motor homes, recreational vehicle trailers, and slide-in campers from 
the definition of `` `Covered Motor Vehicle' or `Vehicle.' '' Moving 
forward, the Commission will continue to monitor for unfair and 
deceptive practices to determine whether further action is warranted to 
protect consumers, through law enforcement, a future rulemaking, or 
other measures. The Commission notes that no dealer may misrepresent 
material terms; deceive customers about prices, add-ons, or payments; 
charge for products that provide no benefit; or charge consumers 
without express, informed consent. To the extent that dealers engage in 
such conduct, they are in violation of the FTC Act.
    Another commenter contended it was unclear whether all-terrain 
vehicles, go-carts, snowmobiles, scooters, electric bicycles, and golf 
carts were covered by the proposed definition. In response, the 
Commission has modified the first enumerated subpart of the definition 
to refer only to vehicles designed for use on a ``public'' street, 
highway, or road, and to expressly exclude scooters, electric bicycles, 
and golf carts. The definition of `` `Covered Motor Vehicle' or 
`Vehicle' '' in the Final Rule does not cover all-terrain vehicles, go-
carts, or snowmobiles because such vehicles are not designed for use on 
a ``public'' street, highway, or road.\141\
---------------------------------------------------------------------------

    \141\ According to the National Highway Traffic Safety 
Administration, ``Public road means any road under the jurisdiction 
of and maintained by a public authority and open to public travel.'' 
23 CFR 1300.3.
---------------------------------------------------------------------------

    A number of industry association commenters claimed that the 
proposed definition conflicts with definitions of motor vehicle under 
various State laws, and one such commenter requested that, rather than 
finalize a definition of ``Motor Vehicle,'' the Commission defer to the 
definitions promulgated by each State's department of motor vehicles. 
The commenters did not explain how the Rule's definition may actually 
conflict with any laws, or how any alleged duplication would harm 
consumers or competition. To the extent that States have broader or 
narrower definitions, it is not clear why motor vehicle dealers covered 
by the Rule cannot comply with the Rule's provisions and applicable 
State laws. Moreover, the Final Rule provides additional remedies that 
will benefit consumers who encounter conduct that is already illegal 
under State or Federal law, including by adding a mechanism for the 
Commission to redress consumers injured by a dealer's violation of the 
rule, and will assist law-abiding dealers that presently lose business 
to competitors that act unlawfully. Section 463.9 provides further 
discussion of State laws.
    Thus, after careful consideration of the comments, the Commission 
is finalizing the definition of ``Motor Vehicle'' with modifications, 
including adding the word ``Covered'' to the definition to reflect the 
fact that the definition is narrower than the term ``Motor Vehicle'' in 
the NPRM and adding ``or Vehicle'' to the definition to clarify that 
all references in the Rule to the term ``Covered Motor Vehicle'' and 
``Vehicle'' refer to the defined term.
(f) Dealer or Motor Vehicle Dealer (Finalized as `` `Covered Motor 
Vehicle Dealer' or `Dealer' '')
    The proposed rule defined the term ``Dealer'' or ``Motor Vehicle 
Dealer'' as ``any person or resident in the United States, or any 
territory of the United States, that: (1) Is licensed by a State, a 
territory of the United States, or the District of Columbia to engage 
in the sale of motor vehicles; (2) Takes title to, holds an ownership 
interest in, or takes physical custody of motor vehicles; and (3) Is 
predominantly engaged in the sale and servicing of motor vehicles, the 
leasing and servicing of motor vehicles, or both.'' Based on the 
following, the Commission is finalizing this definition in the Final 
Rule with modifications for clarity.
    Many stakeholders commented in support of the proposed rule and 
expressed no concern over this definition. Other commenters expressed 
views that the Commission examines in the following paragraphs.
    A few industry association commenters contended that parts of the 
proposed definition may have captured certain financial entities, such 
as financial entities that maintain licenses to engage in the sale of 
motor vehicles, and requested that the Commission make clear that any 
rule does not apply to such entities. In response, the Commission notes 
that only entities that meet all three components of the definition are 
covered ``Dealers.'' Thus, an entity that maintains an applicable 
license to engage in the sale of Covered Motor Vehicles but is not, for 
example, predominantly engaged in the sale or leasing of motor vehicles 
would not be a covered ``Dealer.''
    Another industry association commenter similarly requested a 
``carve-out'' from any definition of ``Dealer'' for trusts and trusts' 
investors.\142\ This commenter asserted that trusts and their investors 
do not satisfy two of the definition's components and did not describe 
how any part of the definition creates concerns or is unclear. The 
Commission reiterates that if an entity meets the three parts of the 
``Covered Motor Vehicle Dealer'' definition, then it is covered; if an 
entity does not meet these three parts, it is not covered. The 
Commission sees no benefit to adding language stating that entities 
that do not meet the definition are not covered.
---------------------------------------------------------------------------

    \142\ Comment of Structured Fin. Ass'n, Doc. No. FTC-2022-0046-
7646 at 3.
---------------------------------------------------------------------------

    Other commenters, including vehicle association commenters, claimed 
that dealerships specializing in RV, marine, motorcycles, and other 
recreational vehicles, including certain high-end recreational 
vehicles,\143\ should be excluded from coverage, generally contending 
that such dealerships operate differently from automobile dealerships, 
and that these types of vehicles are used for different purposes than 
are automobiles. As explained in the section-by-section analysis of the 
definition of ``Covered Motor Vehicle'' in SBP III.B.2(e), after 
considering stakeholder comments, the Commission

[[Page 608]]

is removing marine, motorcycle, RV, and certain other vehicles from the 
definition in Sec.  463.2(e), and to reflect this change, finalizing 
the defined term as `` `Covered Motor Vehicle' or `Vehicle,' '' thereby 
excluding from the Final Rule entities who otherwise would have 
qualified as ``Dealers'' solely based on their sale and servicing, or 
leasing and servicing, of such vehicles. The Commission underscores 
that, regardless of the definition of ``Covered Motor Vehicle'' under 
the Final Rule, unfair and deceptive practices remain unlawful under 
the FTC Act. The Commission will continue to monitor all vehicle 
markets to determine whether additional action is warranted to protect 
consumers.
---------------------------------------------------------------------------

    \143\ The Marine Retailers Association of the Americas requested 
that transactions in excess of $70,000 be excluded from coverage, as 
an alternative to excluding marine transactions altogether. See 
Comment of Marine Retailers Ass'n of the Ams., Doc. No. FTC-2022-
046-9291 at 4.
---------------------------------------------------------------------------

    Some dealership association commenters argued that, under the 
Commission's proposal, this definition exempted dealers subject to the 
jurisdiction of the CFPB. Other such commenters similarly contended 
that, under the proposal, used car dealers that do not engage in 
extensive post-sale repairs do not ``service'' vehicles or that do not 
have separate service departments may have been excluded from coverage, 
contending further that excluding such dealers would put other dealers 
at a competitive disadvantage. Contrary to these commenters' 
assertions, the definition does not contain such exclusions. By its 
plain terms, the definition applies to dealers that meet its three 
enumerated components. Nowhere does the definition limit coverage of 
dealers based on CFPB jurisdictional considerations. Likewise, the 
definition does not condition coverage on whether a dealership has a 
service department or include any other requirement or limitation 
beyond those enumerated in Sec.  463.2(f). By its plain meaning, the 
term ``servicing'' covers, for instance, ``checking and repairing a 
vehicle, machine, etc. to keep it in good condition.'' \144\ As the 
Commission has previously stated, the term ``servicing'' ``captures 
activities undertaken by essentially all used car dealers.'' \145\ 
Thus, the definition does not place dealers with separate servicing 
departments at a competitive disadvantage, and the Commission need not 
remove the term ``servicing of motor vehicles'' from the Final Rule.
---------------------------------------------------------------------------

    \144\ The Oxford Advanced American Dictionary defines 
``servicing'' as ``the act of checking and repairing a vehicle, 
machine, etc. to keep it in good condition''; see also 15 U.S.C. 
5519(b)(3) (referring to ``the sale, financing, leasing, rental, 
repair, refurbishment, maintenance, or other servicing of motor 
vehicles, motor vehicle parts, or any related or ancillary product 
or service'').
    \145\ Used Motor Vehicle Trade Regulation Rule (``Used Car 
Rule''), 81 FR 81664, 81667 (Nov. 18, 2016).
---------------------------------------------------------------------------

    One such commenter further contended that the proposed definition 
did not cover certain entities, including certain direct sellers or 
manufacturers or others not licensed in a particular State, or lenders 
who offer add-on products such as GAP agreements and debt suspension 
products. As previously discussed, the Final Rule applies to all 
dealers that meet the three parts of this definition.\146\ To the 
extent that the definition does not apply to specific entities, this 
reflects the scope and bounds of the rulemaking authority Congress 
delegated to the Commission under the Dodd-Frank Act.\147\
---------------------------------------------------------------------------

    \146\ See 12 U.S.C. 5519(a), (f).
    \147\ Section 1029(d) of the Dodd-Frank Act defines ``motor 
vehicle dealer'' as ``any person or resident in the United States, 
or any territory of the United States, who--(A) is licensed by a 
State, a territory of the United States, or the District of Columbia 
to engage in the sale of motor vehicles; and (b) takes title to, 
holds an ownership in, or takes physical custody of motor 
vehicles.'' 15 U.S.C. 5519(f)(2).
    Parts (A) and (B) of this definition are identical to parts (1) 
and (2) of the definition of `` `Covered Motor Vehicle Dealer' or 
`Dealer' '' in the Final Rule.
    Section 1029(d) of the Dodd-Frank Act states that the Commission 
``is authorized to prescribe rules under sections 5 and 18(a)(1)(B) 
of the Federal Trade Commission Act in accordance with section 553 
of title 5, United States Code, with respect to a person described 
in subsection (a).'' 15 U.S.C. 5519(d). Section 1029(a) in turn, 
provides the CFPB ``may not exercise any rulemaking, supervisory, 
enforcement or any other authority . . . over a motor vehicle dealer 
that is predominantly engaged in the sale and servicing of motor 
vehicles, the leasing and servicing of motor vehicles, or both.'' 15 
U.S.C. 5519(a). The last clause is identical to part (3) of the 
definition in the Final Rule.
    Several commenters requested that the Commission allow consumers 
to buy vehicles directly from manufacturers. Nothing in the Rule 
prohibits consumers from doing so.
---------------------------------------------------------------------------

    Finally, some industry and dealership association commenters 
posited that the proposal conflicted with Federal and State law or 
duplicated the regulatory authority of State enforcement agencies. 
These commenters did not provide information regarding how duplicative 
laws prohibiting misrepresentations, requiring disclosures, or 
prohibiting charges for items that would not benefit the consumer or 
for items without express, informed consent would create harmful 
consequences, and the Commission is not aware of any laws that allow 
such conduct by those that the Rule defines as ``Covered Motor Vehicle 
Dealer[s].'' Moreover, the Final Rule provides additional remedies that 
will benefit consumers who encounter conduct that is already illegal 
under State or Federal law, including by adding a mechanism for the 
Commission to redress consumers injured by a dealer's violation of the 
Rule, and will assist law-abiding dealers that presently lose business 
to competitors that act unlawfully. To the extent the Rule may overlap 
with State law, dealers can comply with these laws and also with the 
requirements that follow from the operation, in the Rule, of the 
Commission's definition. To the extent there is truly an inconsistency 
between the provisions of the Final Rule and a State law, Sec.  463.9 
sets out the Rule's relation to State laws.
    Thus, after careful consideration of the comments, the Commission 
is finalizing the definition of `` `Covered Motor Vehicle Dealer' or 
`Dealer' '' with modifications for clarity. The definition in the Final 
Rule incorporates the phrase ``including any individual or entity'' to 
confirm that the term ``person,'' like all undefined terms in this 
part, is used according to its ordinary meaning and includes 
individuals and corporate entities and adds the word ``Covered'' to the 
definition to reflect the narrowed scope of ``Covered Motor Vehicle.'' 
\148\
---------------------------------------------------------------------------

    \148\ See, e.g., Person, Black's Law Dictionary (11th ed. 2019) 
(defining ``person'' to include ``[a] human being'' and ``[a]n 
entity (such as a corporation) that is recognized by law as having 
most of the rights and duties of a human being.''); Person, Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/person (last visited Dec. 5, 2023) (defining ``person'' to include 
``human'' and ``one (such as a human being, a partnership, or a 
corporation) that is recognized by law as the subject of rights and 
duties''); see also 12 U.S.C. 5481(19) (Dodd-Frank Act statutory 
authority for the Final Rule defining ``person'' as ``an individual, 
partnership, company, corporation, association (incorporated or 
unincorporated), trust, estate, cooperative organization, or other 
entity''); 1 U.S.C. 1 (Dictionary Act defining ``person'' to include 
``corporations, companies, associations, firms, partnerships, 
societies, and joint stock companies, as well as individuals''). The 
application of covered motor vehicle dealer and dealer to entities 
also is consistent with these terms' use in the NPRM and commenter 
understanding of these terms in the course of public comment.
---------------------------------------------------------------------------

(g) Express, Informed Consent
    The proposed rule defined the term ``Express, Informed Consent'' as 
``an affirmative act communicating unambiguous assent to be charged, 
made after receiving and in close proximity to a Clear and Conspicuous 
disclosure, in writing, and also orally for in-person transactions'' of 
``(1) What the charge is for'' and ``(2) The amount of the charge, 
including, if the charge is for a product or service, all fees and 
costs to be charged to the consumer over the period of repayment with 
and without the product or service.'' The proposed rule also included 
in this definition three examples of what does not constitute express, 
informed consent: ``(i) A signed or initialed document, by itself; (ii) 
Prechecked

[[Page 609]]

boxes; or (iii) An agreement obtained through any practice designed or 
manipulated with the substantial effect of subverting or impairing user 
autonomy, decision-making, or choice.'' In both the NPRM and in the 
provisions the Commission is finalizing, this definition is used 
exclusively in Sec.  463.5(c). As such, comments regarding the 
definition are examined in the discussion of that provision in SBP 
III.E.2(c). As stated therein, the Commission is finalizing this 
definition substantively as proposed.
(h) GAP Agreement
    The proposed rule defined the term ``GAP Agreement'' as ``an 
agreement to indemnify a vehicle purchaser or lessee for any of the 
difference between the actual cash value of the insured's vehicle in 
the event of an unrecovered theft or total loss and the amount owed on 
the vehicle pursuant to the terms of a loan, lease agreement, or 
installment sales contract used to purchase or lease the vehicle, or to 
waive the unpaid difference between money received from the purchaser's 
or lessee's motor vehicle insurer and some or all of the amount owed on 
the vehicle at the time of the unrecovered theft or total loss.'' The 
proposed definition also noted that this included ``products or 
services otherwise titled `Guaranteed Automobile Protection Agreement,' 
`Guaranteed Asset Protection Agreement,' `GAP insurance,' or `GAP 
Waiver[ ].' '' This term appeared in two sections of the rule proposal: 
in the provision regarding dealer charges for add-ons from which the 
consumer would not benefit at proposed Sec.  463.5(a), and in the 
recordkeeping provision at proposed Sec.  463.6(a)(4). Comments 
regarding the proposed definition are examined in the discussion of 
Sec.  463.5(a) in SBP III.E.2(a). As stated therein, the Commission is 
finalizing this definition substantively as proposed, with 
typographical modifications to correct a misplaced period in the 
original proposal and a modification removing the extraneous term 
``insured's'' from the phrase ``actual cash value of the insured's 
Vehicle.'' In addition, the Final Rule capitalizes the defined term 
``Vehicle'' to conform with the revised definition of `` `Covered Motor 
Vehicle' or `Vehicle' '' at Sec.  463.2(e).
(i) Government Charges
    The proposed rule defined ``Government Charges'' as ``all fees or 
charges imposed by a Federal, State or local government agency, unit, 
or department, including taxes, license and registration costs, 
inspection or certification costs, and any other such fees or 
charges.'' This term appeared in two provisions of the rule proposal: 
in the proposed definition of ``Offering Price'' at Sec.  463.2(k), 
which pertains to the proposed offering price disclosure provision at 
Sec.  463.4(a); as well as in the proposed provision relating to 
undisclosed or unselected Add-ons at Sec.  463.5(b). As explained in 
further detail in the paragraph-by paragraph analysis of Sec.  463.5(b) 
in SBP III.E.2(b), the Commission has determined not to finalize Sec.  
463.5(b), and as such will refrain from examining this proposed 
definition in relation to that provision. Comments regarding the 
proposed definition are examined in the discussion of Sec.  463.4(a) in 
SBP III.D.2(a). As stated therein, the Commission is finalizing this 
definition substantively as proposed, with a typographical modification 
to include a serial comma for consistency.
(j) Material or Materially
    The proposed rule defined ``Material'' or ``Materially'' as 
``likely to affect a person's choice of, or conduct regarding, goods or 
services.'' This term appeared in the prohibited misrepresentations 
provisions at Sec.  463.3(b) and (g), and in the recordkeeping 
provision at Sec.  463.6(a). As described in detail in the section-by-
section analysis of Sec.  463.3 in SBP III.C, the Final Rule modifies 
the introductory paragraph of Sec.  463.3 from the Commission's 
original proposal to add the word ``Material,'' such that the 
Commission's materiality standard applies to all subparts of Sec.  
463.3. The Final Rule accordingly removes the word ``Material'' from 
Sec.  463.3(b) and (g) so as to avoid duplication. Based on the 
following, the Commission is finalizing this definition, now at Sec.  
463.2(j), substantively as proposed.
    A dealership association commenter noted that the proposed 
definition did not use the term ``significance,'' and asserted that 
``Material'' information should be significant and not ``rooted in 
personal preference.'' \149\ The Commission notes that this definition 
adopts the meaning of the term as articulated through decades of 
enforcement actions \150\ instead of using a different term such as 
``significance,'' and does not use the term ``personal preference'' or 
rely on ``personal preference'' any more than the phrase ``likely to 
affect'' or ``significant'' does. Thus, the Commission is finalizing 
this definition substantively as proposed.
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    \149\ Comment of Ga. Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-10806 at 4.
    \150\ See FTC Policy Statement on Deception, supra note 42, at 
1-2, 5; see also Fed. Trade Comm'n v. Fleetcor Techs., Inc., 620 F. 
Supp. 3d 1268, 1303 (N.D. Ga. 2022); Fed. Trade Comm'n v. Crescent 
Pub. Grp., Inc., 129 F. Supp. 2d 311, 321 (S.D.N.Y. 2001); Thompson 
Med. Co., Inc., 104 F.T.C. 648, 816 (1984).
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(k) Offering Price
    The proposed rule defined ``Offering Price'' as ``the full cash 
price for which a Dealer will sell or finance the motor vehicle to any 
consumer, excluding only required Government Charges.'' This term 
appeared in two provisions of the rule proposal: in the proposed 
offering price disclosure provision at Sec.  463.4(a), as well as in 
the proposed provision relating to undisclosed or unselected add-ons at 
Sec.  463.5(b). As explained in further detail in the paragraph-by-
paragraph analysis of Sec.  463.5(b) in SBP III.E.2(b), the Commission 
has determined not to finalize Sec.  463.5(b), and as such, will 
refrain from examining this proposed definition in relation to that 
provision. Comments regarding the proposed definition are examined in 
the discussion of Sec.  463.4(a) in SBP III.D.2(a).\151\ As stated 
therein, the Commission is finalizing this definition largely as 
proposed, with a modification to clarify that dealers may, but need 
not, exclude required government charges from a motor vehicle's 
offering price. In addition, the definition in the Final Rule 
substitutes ``Vehicle'' for ``motor vehicle'' to clarify that the term 
conforms with the revised definition of `` `Covered Motor Vehicle' or 
`Vehicle' '' at Sec.  463.2(e).
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    \151\ Some commenters, including certain industry associations, 
requested that the Rule include additional definitions, including 
for the terms ``charged,'' ``item,'' ``discount,'' ``rebate,'' 
``trade-in value,'' and ``online service.'' In response, the 
Commission notes that for terms not defined in the Rule, the plain 
meaning of the terms apply.
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C. Sec.  463.3: Prohibited Misrepresentations

1. General Comments
    The proposed rule set forth prohibitions against certain 
misrepresentations by motor vehicle dealers. Based on the following, 
the Commission has determined to finalize these prohibitions, with 
minor revisions.
    The following paragraphs discuss comments relating to Sec.  463.3 
generally and Commission responses to such comments, followed by 
comments relating to each paragraph of Sec.  463.3 and Commission 
responses to such comments.
    The NPRM proposed prohibiting dealers from making any 
misrepresentation, expressly or by implication, regarding specific 
listed categories. The Commission received many comments regarding this

[[Page 610]]

proposal, including comments supporting such a provision, comments 
urging the Commission to broaden the provision, and comments urging the 
Commission to limit or forgo the provision.
    Thousands of commenters expressed support for the proposed 
rule.\152\ Many of these commenters specifically expressed concern 
about misleading advertisements and deceptive pricing. Many individual 
commenters cited examples of such conduct from their own experiences 
purchasing or leasing vehicles, and many commenters with experience 
operating or working for a dealership shared their observations or 
experiences. For example:
---------------------------------------------------------------------------

    \152\ See Motor Vehicle Dealers Trade Regulation Rule, Comment 
Docket, https://www.regulations.gov/document/FTC-2022-0046-0001/comment.
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    <bullet> I have been looking for a car at MSRP and most dealers['] 
websites will list it at that price. [T]hen when you drive there the[y] 
will say well there is a market adjustment from 5,000 to 20,000 
dollars. [N]ow . . . you need a car and have wasted 3-4 hours and 
picked out what you thought was your next car.\153\
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    \153\ Individual commenter, Doc. No. FTC-2022-0046-0036.
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    <bullet> I am currently in discussions with two dealerships for a 
new car. Both assure me there is absolutely no dealer markup, come to 
find out they are adding 3/5k of ``mandatory'' add-ons respectively 
once I get in the door.\154\
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    \154\ Individual commenter, Doc. No. FTC-2022-0046-0099.
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    <bullet> The last vehicle I purchased 2 years ago was a nightmare. 
Drove 5 hrs[.] to a dealer in Southern California. I called the dealer 
and confirmed the price on their website was what I was going to pay. 
When I arrived there, they had a list of $2500 [i]n additional charges 
that were not disclosed when I called and before I started driving. 
Purchasing a vehicle shouldn't be such a stressful process.\155\
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    \155\ Individual commenter, Doc. No. FTC-2022-0046-0906.
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    <bullet> Most recently I started looking myself for a new lease, 
and looked at the RAV 4 prime. Went to my local dealer after seeing an 
ad on their site for $450 a month. Not only did they not honor the 
deal, but wouldn't even discuss that it was on their own site. I was 
told the SE model was [$5000] over MSRP and the XSE was [$8000] 
over.\156\
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    \156\ Individual commenter, Doc. No. FTC-2022-0046-1878.
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    <bullet> I have contacted 10 different car dealerships in the past 
month looking to purchase a new or used SUV. 9 out of the 10 
dealerships I contacted online or visited in-person in California 
changed or lied about the online advertised price of the vehicle I was 
inquiring about or said the car was sold or not available and tried to 
sell me a more expensive vehicle.\157\
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    \157\ Individual commenter, Doc. No. FTC-2022-0046-3686.
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    <bullet> Once I was led to the F&I office I was told that I HAD to 
buy a $995 paint protection product that I didn[']t want or need. I 
asked to see the contract for this product which clearly stated in bold 
letters `ACCEPTANCE OF THIS CONTRACT IS VOLUNTARY AND DOES NOT AFFECT 
THE FINANCING OF THE VEHICLE' I pointed this out to the salesman and 
told him that I didn't want this product[.] [H]e looked me in the eyes 
with my wife present and said ``You have to buy it[.]'' \158\
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    \158\ Individual commenter, Doc. No. FTC-2022-0046-4752.
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    <bullet> At the dealership, the salesman offered a price of 
$38,000, over $8,000 more than the advertised price. When I challenged 
the extra cost, he said the advertisement included every possible 
rebate and discount and no one could receive them together (some were 
exclusionary with other discounts).\159\
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    \159\ Individual commenter, Doc. No. FTC-2022-0046-5580.
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    <bullet> While there are good honorable dealerships, far too many 
play games. Rarely is the price of [a] car advertised online or via 
mail EVER the actual price. Far too often in the F&I office the finance 
manager tries to [gloss] over add[-]ons that they just arbitrarily 
added on without telling you OR state I cannot get your loan approved 
without an extended warranty as an example I experienced. . . . I 
worked for a Toyota dealership many years ago and left the industry 
because it made me sick seeing the games played taking advantage of 
people. Change is needed and sooner than later.\160\
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    \160\ Individual commenter, Doc. No. FTC-2022-0046-2378.
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    <bullet> I work as a salesperson at a local Nissan dealership. . . 
. Currently, dealerships across the US, including the one I work for, 
have made the car buying process needlessly confusing, expensive, and 
frustrating by engaging in false advertising and hidden add-on 
products. While these practices are very unscrupulous, they are 
incredibly effective at what they are designed to do: drive revenue for 
the store. If these regulations are passed, they would certainly take a 
significant toll on my personal finances. But the longer I work in my 
position, the more I realize that no one should be allowed to engage in 
such exploitative conduct in the course of running a business.\161\
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    \161\ Individual commenter, Doc. No. FTC-2022-0046-3693.
---------------------------------------------------------------------------

    <bullet> I am in the auto industry and work at a very transparent 
and honest dealership. I think most of these rules are great. I hear 
horror stories about honest people seeing a car advertised for one 
price, only to be told there are additional a[d]d-ons and markups once 
they arrive. I think this is unfair. I'm also shocked every time I hear 
about a dealership charging for mandatory window etching and nitrogen 
filled tires. I even know of reputable dealerships that add GPS 
tracking and theft recovery devices to every new car, even though these 
cars come with GPS theft recovery from the manufacturer. Stopping these 
practices will help restore consumers' faith in car dealerships, save 
them money, and lead to a more honest and ethical industry. . . .\162\
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    \162\ Individual commenter, Doc. No. FTC-2022-0046-4959.
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    Other commenters expressed support for transparent pricing 
generally, stating, for example:
    <bullet> A consumer should be able to see a price, walk into a 
dealership, and pay that price. Plain and simple, just like ANY OTHER 
RETAILER.'' \163\
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    \163\ Individual commenter, Doc. No. FTC-2022-0046-0017.
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    <bullet> If I walk into Best Buy and see a price they HAVE to sell 
it to me for that price or cheaper. These rules are long over due.\164\
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    \164\ Individual commenter, Doc. No. FTC-2022-0046-0034.
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    <bullet> I believe if they advertise a car, it should be available 
for sale--at the advertised price--just as a supermarket can't 
advertise a price for something they don't have, or add a `coupon 
redemption fee' to it. I believe these rules are an extremely 
reasonable approach to a long-standing problem and urge you to adopt 
them.\165\
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    \165\ Individual commenter, Doc. No. FTC-2022-0046-0005.
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    <bullet> I used to work in the retail auto industry and these 
proposed rules will help everyone (including the dealers who are 
fighting them). Consumers will benefit from the transaction 
transparency, and over the long term even the shady dealers will 
benefit by treating consumers fairly and developing long term 
relations.\166\
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    \166\ Individual commenter, Doc. No. FTC-2022-0046-1935.
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    <bullet> These regulations would be the best thing to happen for 
consumer protection since the Mo[n]roney Label. I not only have had to 
navigate and negotiate erroneous fees at dealers, but I've also

[[Page 611]]

worked at dealers whose transparency and forthrightness put them at a 
disadvantage. Many dealers advertise vehicles that can not [sic] be 
purchased or leased at the advertised price due to deceptive adverts 
either not disclosed or in a print so fine it can't be read. Please 
pass this ruling. My grandma shouldn't have to pay more than someone 
else just because she's not a good negotiator.\167\
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    \167\ Individual commenter, Doc. No. FTC-2022-0046-10441.
---------------------------------------------------------------------------

    Consumer advocacy organization commenters and individual commenters 
urged the FTC to include additional specific provisions in Sec.  463.3, 
including a prohibition against misrepresentations regarding the 
safety, mechanical or structural condition, odometer reading, or 
history of a vehicle. Similarly, commenters including a municipal 
regulator urged the Commission to specifically prohibit 
misrepresentations regarding certification of used vehicles, citing 
enforcement actions it brought against dealers that misrepresented used 
vehicles as ``certified pre-owned'' or ``manufacturer certified.'' The 
FTC takes seriously deception relating to the safety or condition of a 
vehicle and the practice of charging consumers more based on false 
claims or reassurances.\168\ Depending on the claim made by the 
dealership and the specific facts at issue, deceptive conduct in either 
of these areas may be covered by the enumerated misrepresentation 
paragraphs the Commission is finalizing, such as by Sec.  463.3(a) if 
it relates to the terms of the purchase, lease, or financing. The FTC 
will continue to monitor dealer misrepresentations to determine whether 
additional action is needed.
---------------------------------------------------------------------------

    \168\ See, e.g., Complaint, CarMax, Inc., No. C-4605 (F.T.C. 
Mar. 22, 2017) (alleging Defendants misled consumers by representing 
that the used motor vehicles Defendants sold had been subject to 
rigorous inspection but omitting important safety information about 
recalls); Complaint, West-Herr Auto. Grp., Inc., No. C-4607 (F.T.C. 
Mar. 22, 2017) (alleging Defendants failed to disclose, or disclose 
adequately, that used motor vehicles it sold were subject to open 
recalls for safety issues); Complaint, Asbury Auto. Grp., Inc., No. 
C-4606 (F.T.C. Mar. 22, 2017) (alleging deceptive failure to 
disclose material information about the safety of used motor 
vehicles sold by Defendants); Complaint ]] 20-24, Fed. Trade Comm'n 
v. Passport Imports, Inc., No. 8:18-cv-03118 (D. Md. Oct. 10, 2018) 
(alleging Defendants misled consumers by mailing ``Urgent Recall'' 
notices that were similar to and had the same color scheme as 
notices manufacturers are required by the U.S. Department of 
Transportation's NHTSA to use when sending information about vehicle 
recalls, even though in the ``vast majority of instances'' the 
recipients' cars were not subject to an open recall).
---------------------------------------------------------------------------

    In addition, a number of credit union commenters requested that the 
Commission explicitly address misrepresentations involving dealers' 
refusal to accept outside financing to purchase a vehicle. These 
commenters cited several examples of consumers being told that they 
could not use outside financing, that they would not receive a lower 
interest rate from an outside financial institution, or that a 
particular interest rate was the best rate the consumer can get. The 
Rule already covers such conduct. For example, Sec.  463.3(a) of the 
Rule, which prohibits dealers from misrepresenting the cost or terms of 
financing a vehicle, covers these and other misrepresentations 
regarding financing, including the availability of outside or 
``indirect'' financing terms, or the costs of such financing as 
compared to those of any dealer-provided financing.
    Two individual commenters posited that any language prohibiting 
misrepresentations should explicitly include the word ``omissions,'' in 
order to ensure that dealers do not sneak in additional costs without 
consumers' consent or understanding. The Commission appreciates this 
concern, and notes that the Rule has many provisions prohibiting such 
misconduct, including the required disclosures regarding price, add-
ons, and total amount of payments in Sec.  463.4 of the Final Rule, as 
well as the requirement in Sec.  463.5(c) to obtain consumers' express, 
informed consent before charging for any items.
    Other commenters, including dealership associations, individual 
commenters, and a United States Representative, questioned whether 
certain of the proposed misrepresentation provisions were duplicative 
of other laws, such as the Truth in Lending Act (``TILA''), the 
Consumer Leasing Act (``CLA''), or State regulations, and in some 
instances whether compliance with State regulations should act as a 
safe harbor. The Commission notes that another statute--the FTC Act--
already prohibits misrepresentations in or affecting commerce, and to 
the extent there is duplication between the FTC Act and other existing 
statutes pertaining to deception, there is no evidence that duplicative 
misrepresentation prohibitions have harmed consumers or 
competition.\169\ The Commission further notes that the Final Rule 
provides additional remedies that will benefit consumers who encounter 
conduct that is otherwise already illegal under Federal law, and will 
aid law-abiding dealers that lose business to competitors that act 
unlawfully.\170\ State laws may provide more or less specific 
requirements as long as those requirements are not inconsistent with 
part 463, as set forth in Sec.  463.9, and in the event of an 
inconsistency, the Rule only affects such State law to the extent of 
the inconsistency. Because dealers are already prohibited from engaging 
in ``deceptive acts or practices'' under the FTC Act, dealers should be 
able to comply with these provisions without the need for a safe 
harbor.
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    \169\ One commenter expressed concern that the prohibited 
misrepresentations would cause dealerships to provide less 
information, because discussing pricing and quotes would result in 
providing further documentation for every conversation. However, as 
the FTC Act already prohibits misrepresentations, and given that 
pricing and financing information are among the most salient aspects 
of a consumer's shopping for a vehicle, the Commission considers it 
unlikely that Sec.  463.3 would result in less information or the 
creation of additional documentation.
    \170\ Under section 19(a)(1) of the FTC Act, the Commission may 
sue in Federal district court ``any person, partnership, or 
corporation'' that ``violates any rule under [the FTC Act] 
respecting unfair or deceptive acts or practices.'' 15 U.S.C. 
57b(a)(1). Where such liability is found, under section 19(b) a 
court may ``grant such relief as [it] finds necessary to redress 
injury . . . resulting from the rule violation,'' including the 
``rescission or reformation of contracts, the refund of money or 
return of property, [or] the payment of damages.'' Id. 57b(b).
    A few commenters requested that the Rule go further in providing 
remedies, including by allowing for a private right of action to 
enforce Rule violations. The Commission notes that, depending on 
State law, consumers may be able to use State statutes that prohibit 
unfair or deceptive practices to challenge conduct that violates 
this Rule.
    There is nothing in the FTC Act or this Rule that would preclude 
consumers from exercising any such legal rights under State law. The 
Commission will continue to monitor the market to determine whether 
additional steps are needed.
---------------------------------------------------------------------------

    Industry association commenters also claimed that the prohibited 
misrepresentation proposal ignored the materiality prong of the 
Commission's deception standard, and further observed that some of the 
prohibited misrepresentations in the proposed rule explicitly included 
a materiality requirement,\171\ while others did not. As the NPRM made 
clear, the Commission's proposed misrepresentation section, at Sec.  
463.3, addressed misrepresentations that are all material.\172\ The 
Commission need not explicitly specify materiality in its description 
of these misrepresentations; indeed, the Commission has long considered 
certain categories of information, express claims, and intended implied 
claims to be presumptively material.\173\ Nevertheless, rather than 
using the term ``Material'' in certain individual enumerated 
paragraphs, the Commission has determined to modify the introductory 
text of Sec.  463.3 from the Commission's original proposal in order

[[Page 612]]

to specifically prohibit misrepresentations regarding material 
information about the enumerated paragraphs. As such, the Commission is 
also removing what would otherwise be redundant references to the term 
``Material'' within paragraphs (b) and (g) of Sec.  463.3.
---------------------------------------------------------------------------

    \171\ See NPRM at 42045 (proposed Sec.  463.3(b), (g)).
    \172\ NPRM at 42019.
    \173\ FTC Policy Statement on Deception, supra note 42, at 5 & 
nn.47-55.
---------------------------------------------------------------------------

    A national dealership association incorrectly asserted that this 
section is problematic because there is no requirement that the 
representation or omission be material or be viewed from the 
perspective of a consumer acting reasonably under the circumstances. As 
adopted in the final rule, this section adds the term ``Material,'' 
stating that it is an unfair or deceptive practice for any motor 
vehicle dealer to make any misrepresentation, expressly or by 
implication, regarding material information about the specific 
categories enumerated in Sec.  463.3.\174\ The Commission is not aware 
of situations where dealers have made misrepresentations expressly or 
by implication regarding material information about these specific 
categories that are not deceptive or unfair, nor did commenters 
describe any such situations.
---------------------------------------------------------------------------

    \174\ The Final Rule prohibits misrepresentations in specific 
categories. In contrast, some FTC rules go further by prohibiting 
misrepresentations of ``any material aspect'' of the transaction. 
See, e.g., Mortgage Assistance Relief Services Rule, 16 CFR 
322.3(b); Telemarketing Sales Rule, 16 CFR 310.3(a)(2)(x).
---------------------------------------------------------------------------

    The Commission further notes that, by the terms of this section, a 
court must find that the dealer made an express or implied 
misrepresentation regarding material information for Sec.  463.3 to be 
violated. For an express or implied misrepresentation regarding 
material information to be made in violation of the FTC Act and this 
Rule, there must be a representation that misleads consumers acting 
reasonably under the circumstances regarding material information. 
Whether such a representation has occurred depends on the facts. In the 
case of implied representations, whether a representation has occurred 
is often evident from an examination of the representation itself, 
including, for example, an evaluation of the document in which a 
representation is made, the juxtaposition of language in that document, 
the nature of the representation, and the nature of the 
transaction.\175\ In other situations, extrinsic evidence that it is 
reasonable for consumers to reach the implied representation may be 
helpful, such as consumer testimony, surveys, or other reliable 
evidence of consumer interpretation.\176\
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    \175\ FTC Policy Statement on Deception, supra note 42, at 2 
(citing Am. Home Prods., 98 F.T.C. 136, 374 (1981), aff'd, 695 F.2d 
681, 687 (3d Cir. 1982) (evaluation of the entire document); Warner 
Lambert, 86 F.T.C. 1398, 1489-90 (1975), aff'd 562 F.2d 749 (D.C. 
Cir. 1977), cert. denied, 435 U.S. 950 (1978) (juxtaposition of 
phrases); Firestone Tire & Rubber Co., 81 F.T.C. 398, 456 (1972), 
aff'd, 481 F.2d 246 (6th Cir.), cert. denied, 414 U.S. 1112 (1973) 
(nature of the claim); see also Kraft, Inc. v. Fed. Trade Comm'n, 
970 F.2d 311, 319 (7th Cir. 1992) (``Commission may rely on its own 
reasoned analysis to determine what claims, including implied ones, 
are conveyed in a challenged advertisement, so long as those claims 
are reasonably clear from the face of the advertisement.'').
    \176\ FTC Policy Statement on Deception, supra note 42, at 2 
n.8.
---------------------------------------------------------------------------

    For example, if a dealer offers discounted coffee for customers who 
visit its dealership before 10 a.m. and honors that offer, but makes no 
representations, expressly or by implication, about discounted cars, 
the dealer will not have violated Sec.  463.3(d), which prohibits 
express or implied misrepresentations regarding rebates and discounts, 
even if a consumer holds an unreasonable belief that the offer was for 
discounted cars. On the other hand, if a dealership's advertisement 
depicts a car with a consumer standing next to it holding a cup of 
coffee, and states, ``10% discount available before 10 a.m.,'' such an 
advertisement can convey several representations that may mislead 
reasonable consumers,\177\ including that the car is available at a 10% 
discount.
---------------------------------------------------------------------------

    \177\ The interpretation or reaction does not have to be the 
only one; when a seller's representation conveys more than one 
meaning to reasonable consumers, one of which is false, the seller 
is liable for the misleading interpretation. See FTC Policy 
Statement on Deception, supra note 42, at 3. Further, an 
interpretation will be presumed reasonable if it is the one the 
respondent intended to convey. Id.
---------------------------------------------------------------------------

    Commenters including industry associations opined on the term 
``implied,'' contending for example that the idea that a 
misrepresentation can be implied is overly broad, and a dealership 
association commenter expressed concern that the inclusion of 
``implied'' creates too much uncertainty. As has been recognized under 
the law for decades, however, representations can mislead consumers, 
even without making express claims.\178\ Take, for example, an 
advertisement that shows a picture of a new sedan for sale. Even if the 
advertisement does not expressly state that consumers could use the 
vehicle to drive at speeds higher than 25 miles per hour, there is an 
implied representation that a product is fit for the purposes for which 
it is sold.\179\ Thus, limiting the Rule to prohibit only express 
misrepresentations would significantly hamper its usefulness to 
consumers.
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    \178\ The FTC's Policy Statement on Deception and scores of FTC 
cases make clear that both express and implied claims can be 
deceptive. See, e.g., ECM Biofilms, Inc. v. Fed. Trade Comm'n, 851 
F.3d 599 (6th Cir. 2017) (affirming Commission's finding that an 
additive manufacturer's unqualified biodegradability claim conveyed 
an implied claim that its plastic would completely biodegrade within 
five years); POM Wonderful LLC, No. C-9344 (F.T.C. Jan. 10, 2013) 
(Opinion of the Commission), aff'd as modified, POM Wonderful, LLC 
v. Fed. Trade Comm'n, 777 F.3d 478 (D.C. Cir. 2015) (finding that 
company's advertisements would reasonably be interpreted by 
consumers to contain an implied claim that POM products treat, 
prevent, or reduce the risk of certain health conditions and for 
some ads that these effects were clinically proven); Kraft, Inc. v. 
Fed. Trade Comm'n, 970 F.2d 311 (7th Cir. 1992) (affirming finding 
of deception where Kraft ads juxtaposed references to the milk 
contained in Kraft singles and the calcium content of the milk, the 
combination of which implied that each Kraft single contained the 
same amount of calcium as five ounces of milk).
    \179\ FTC Policy Statement on Deception, supra note 42, at 2; 
Int'l Harvester Co., 104 F.T.C. 949, 1057-58 (1984).
---------------------------------------------------------------------------

    One industry association commenter further argued that the proposed 
rule created a new deception standard that ignored intent and reliance. 
This argument, however, misstates the law, which does not require 
intent \180\ or reliance \181\ to establish deception.
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    \180\ See Fed. Trade Comm'n v. Freecom Commc'ns, 401 F.3d 1192, 
1202 (10th Cir. 2005) (``Because the primary purpose of Sec.  5 is 
to protect the consumer public rather than punish the wrongdoer, the 
intent to deceive the consumer is not an element of a Sec.  5 
violation.'').
    \181\ See Fed. Trade Comm'n v. Figgie Int'l, Inc., 994 F.2d 595, 
605-06 (9th Cir. 1993) (holding that section 19 of the FTC Act does 
not require proof of individual consumer reliance; rather, there is 
a ``presumption of actual reliance'' that arises once the Commission 
has proved that a defendant made material misrepresentations, that 
they were widely disseminated, and that consumers purchased the 
defendant's product).
---------------------------------------------------------------------------

    Thus, the Commission is finalizing the introductory paragraph of 
Sec.  463.3 largely as proposed, with a modification stating that it 
applies to misrepresentations regarding material information. For 
consistency with other parts of the Rule, the Commission is also 
removing the shorthand ``FTC Act'' that appeared in parentheses after 
``the Federal Trade Commission Act'' in the introductory paragraph of 
the proposed rule. For clarity and consistency with the revised 
definition of ``Covered Motor Vehicle Dealer'' (at Sec.  463.2(f) and 
discussed in SBP III.B.2(f)), the Commission is adding the word 
``Covered'' to ``Motor Vehicle Dealer'' in the introductory paragraph. 
Finally, without changing any substantive requirements for covered 
entities, the Commission is adding the following sentence to the end of 
Sec.  463.3, at newly designated paragraph (q): ``The requirements in 
this section also are prescribed for the purpose of preventing the 
unfair or deceptive acts or practices

[[Page 613]]

defined in this part, including those in Sec. Sec.  463.4 and 463.5.''
    The Commission examines each paragraph of Sec.  463.3, including by 
examining related comments and Commission responses to those comments. 
The Commission then discusses the corresponding provisions of the Final 
Rule.
2. Paragraph-by-Paragraph Analysis of Sec.  463.3
(a) The Costs or Terms of Purchasing, Financing, or Leasing a Vehicle
    Proposed Sec.  463.3(a) prohibited misrepresentations regarding the 
cost or terms of purchasing, financing, or leasing a vehicle. The 
Commission is finalizing this provision largely as proposed, with the 
minor modification of capitalizing the defined term ``Vehicle'' to 
conform with the revised definition at Sec.  463.2(e) (explained in SBP 
III.B.2(e)). As previously discussed, the addition of ``material'' to 
the introductory paragraph of Sec.  463.3 will apply to this paragraph 
and to all paragraphs of Sec.  463.3 that follow.
    A number of commenters expressed support for this proposed 
provision, contending, inter alia, that it would level the playing 
field for car buyers and address unfair and deceptive practices related 
to financing terms and conditions.
    The Commission received a number of industry association comments 
requesting that the Commission clarify the operation of proposed Sec.  
463.3(a), including for example, by clarifying whether it would require 
dealers to discuss all purchase, finance, or lease terms, or whether it 
would require dealers to read aloud all the terms of the buyer's order 
and finance or lease agreement. Dealership association commenters 
expressed a related concern that this proposed provision lacked 
specific guidance on dealer compliance.
    To begin, misrepresentations regarding ``costs or terms of 
purchasing, financing, or leasing a vehicle'' refer to the ordinary 
plain meaning of the words used in the provision.\182\ Second, as the 
language in the introductory paragraph of Sec.  463.3 makes clear, its 
paragraphs--including paragraph (a) of Sec.  463.3--prohibit 
misrepresentations regarding material information. By its terms, this 
paragraph requires no particular affirmative disclosures, whether 
written or oral; rather, this paragraph obligates dealers to refrain 
from misrepresentations regarding material information about the costs 
or terms of purchasing, financing, or leasing a vehicle.\183\
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    \182\ Examples of ``costs or terms of purchasing, financing, or 
leasing a vehicle'' include, among other things, express or implied 
representations regarding a vehicle's total cost, down payments, 
interest rates, repayment schedules, the price for added features, 
other charges, certainty or finality of terms, and the availability 
of discounts. The Commission has brought numerous enforcement 
actions where, for example, dealers have misrepresented the total 
price a consumer could pay for vehicles, or concealed a required 
down payment or other restrictions on the offer. See, e.g., 
Complaint ]] 10-11, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., 
No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging false ads 
stating a certain price but charging consumers higher prices); 
Complaint ]] 38-46, Fed. Trade Comm'n v. Tate's Auto Ctr. of 
Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 2018) 
(alleging false ads touting attractive terms but concealing (i) ads 
were for lease offers only and required substantial initial payment, 
(ii) discounts were subject to material limitations, or (iii) other 
legally required disclosures); Complaint ]] 7-16, Cowboy AG, LLC, 
No. C-4639 (F.T.C. Jan. 4, 2018) (alleging false ads touting 
attractive terms, but concealing substantial down payments, offers 
were for leases and not purchases, material eligibility 
restrictions, and other legally required disclosures).
    \183\ Some commenters repeat this and similar questions, 
regarding what types of disclosures are required, through provision 
(o); the same response applies--provisions (a) through (o) do not 
affirmatively require particular disclosures. As with all 
misrepresentations prohibited by the Rule, and under section 5 of 
the FTC Act, misrepresentations are barred whether they are made 
expressly or by implication.
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    The Commission received comments from industry associations 
requesting that the Final Rule provide a safe harbor from liability 
stemming from dealers' violations of the Rule to vehicle credit 
contract assignees, who take or receive these contracts subject to all 
claims and defenses consumers could assert against the dealer under the 
Commission's Trade Regulation Rule Concerning Preservation of 
Consumers' Claims and Defenses, also known as the ``Holder Rule.'' 
\184\ The Rule, however, does not create liability for these entities 
under the Holder Rule where it did not previously exist; the Rule 
addresses conduct that is unfair or deceptive under the FTC Act. When 
enacting the Holder Rule, the Commission did not include a safe harbor 
or exceptions involving any specific deceptive or unfair conduct, and 
the Commission declines to do so through this Rule.
---------------------------------------------------------------------------

    \184\ See Trade Regulation Rule Concerning Preservation of 
Consumers' Claims and Defenses, 16 CFR 433.2 [hereinafter Holder 
Rule].
---------------------------------------------------------------------------

    A comment from a motor vehicle industry association argued that 
this provision would likely be inapplicable, or less impactful, with 
regard to RV sales because the RV industry rarely offers leases, if at 
all, and because RV sales are usually not financed through RV 
manufacturer-controlled financing companies. To the extent that 
specific provisions do not apply to specific entities, such provisions 
do not impose any obligations upon those entities. Nevertheless, as 
explained in the analysis of the ``Covered Motor Vehicle'' definition, 
Sec.  463.2(e), the Commission is excluding recreational vehicle 
dealers from the definition of ``Covered Motor Vehicle.''
    After carefully considering the comments, the Commission is 
finalizing paragraph (a) of Sec.  463.3 with the minor modification of 
capitalizing ``Vehicle.'' This provision prohibits misrepresentations 
regarding ``[t]he costs or terms of purchasing, financing, or leasing a 
Vehicle.'' Misrepresentations of the price, discounts, or other terms 
are likely to cause consumers to waste time pursuing unavailable or 
inapplicable offers and to spend more money on a vehicle rather than 
undergoing the hours-long process to begin the vehicle search and 
shopping process anew at another dealership. Prohibiting these 
misrepresentations will save consumers time and money and ensure that 
dealers compete on a level playing field.\185\
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    \185\ The National Automobile Dealers Association commissioned a 
survey, released in May of 2023, that asserted the Commission's 
proposed rule would lead to an increase in consumer transaction 
time. Edgar Faler et al., Ctr. for Auto. Rsch., ``Assessment of 
Costs Associated with the Implementation of the Federal Trade 
Commission Notice of Proposed Rulemaking (RIN 2022--14214), CFR part 
463'' (2023), https://www.cargroup.org/wp-content/uploads/2023/05/CAR-Report_CFR-Part-463_Final_May-2023.pdf. This survey was released 
more than seven months after the closure of the comment period for 
the notice of proposed rulemaking on September 12, 2022, and is not 
part of this rulemaking record. These facts notwithstanding, the 
Commission observes that each respondent to this survey was 
presented with a leading statement at the beginning of the survey 
asserting, inter alia, that the proposed rule would impose ``new 
duties [that] are expected to create additional monitoring, 
training, forms, and compliance review responsibilities as well as a 
modification of record keeping systems and coordination with outside 
IT and other vendors'' and ``increase the time of a motor vehicle 
transaction, inhibit online sales, limit price disclosures, and 
increase customer confusion and frustration.'' Id. at 34, 36 
(introductory instructions on the survey instrument sent to 
respondents). In addition, this survey did not explain its selection 
process or criteria for the 60 dealers it surveyed, nor why only 40 
such dealerships provided fully completed survey responses. 
Moreover, the survey report attributed much of this estimated 
increase to proposed rule provisions that the Commission is not 
finalizing.
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(b) Any Costs, Limitation, Benefit, or Any Other Aspect of an Add-On 
Product or Service
    Proposed Sec.  463.3(b) prohibited misrepresentations concerning 
any costs, limitation, benefit, or any other material aspect of an add-
on product or service. Section 463.3(b) of the Final Rule adopts this 
provision without substantive modification. As described in detail in 
SBP III.C.1, the Commission

[[Page 614]]

is modifying Sec.  463.3 from the Commission's original proposal to 
include the term ``Material'' in the introductory paragraph rather than 
in paragraphs (b) or (g) of Sec.  463.3. Section 463.3(b) of the Final 
Rule therefore deletes reference to the term ``Material.''
    The Commission received a number of comments expressing support for 
prohibiting misrepresentations about add-ons, including comments that 
requested specific additional add-on-related misrepresentation 
prohibitions. For example, an auto dealer commenter expressed support 
for prohibiting misrepresentations about whether or not a car has add-
ons already installed. Consumer advocacy organization commenters 
recommended that the Commission include a new paragraph in Sec.  463.3 
prohibiting misrepresentations regarding the consumer's right to cancel 
add-on products or services. This provision, however, already covers 
such conduct: It prohibits misrepresentations regarding material 
information about any costs, limitation, benefit, or any other aspect 
of an add-on product or service. ``Material'' means likely to affect a 
consumer's conduct or choices.\186\ A consumer's right to cancel is 
likely to affect the consumer's conduct regarding an add-on product or 
service. Thus, Sec.  463.3(b) includes representations about a 
consumer's right to cancel an add-on product or service.
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    \186\ See FTC Policy Statement on Deception, supra note 42, at 
2, 5; see also Fed. Trade Comm'n v. Crescent Publ'g Grp., Inc., 129 
F. Supp. 2d 311, 321 (S.D.N.Y. 2001).
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    A number of dealership association commenters argued that the 
language used in this provision is vague or confusing. The terms 
``Material'' and ``Add-on Product or Service,'' however, are 
specifically defined in Sec.  463.2. The remaining terms in this 
provision are commonly used and can be understood according to their 
plain meaning.\187\ The NPRM examined misrepresentations regarding the 
coverage and costs of add-ons, and enforcement actions by the 
Commission and other agencies have documented many instances of such 
misrepresentations.\188\ Examples of the type of conduct prohibited 
include misrepresenting whether add-ons are required in order to 
purchase or lease a vehicle, including by representing that such 
charges are required when in fact they are not, or misrepresenting that 
advertised prices do not include fees beyond routine taxes and fees 
only to subsequently require the purchase of add-ons; misrepresenting 
what is, or is not, covered by, among others, an extended warranty, 
service or maintenance plan, or GAP agreement; \189\ and 
misrepresenting that consumers have provided express, informed consent 
to be charged for add-ons.
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    \187\ E.g., Cost, Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/cost (``Cost'' is 
defined as ``the amount of money needed to buy, do, or make 
something''); Limitation, Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/limitation 
(``Limitation'' is defined as ``something that controls or reduces 
something''); Benefit, Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/benefit (``Benefit'' 
is defined as ``a helpful or good effect, or something intended to 
help'').
    \188\ See, e.g., Complaint ]] 26-27, 70-71, Fed. Trade Comm'n v. 
N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 
2022) (alleging deceptive and unauthorized add-on charges; unfair 
discrimination against minority consumers); Complaint ]] 12-19, Fed. 
Trade Comm'n v. Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. 
May 21, 2020) (alleging deceptive and unauthorized add-on charges in 
consumers' transactions); Complaint ]] 59-64, Fed. Trade Comm'n v. 
Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 
2016) (deceptive and unauthorized add-on charges in consumers' 
transactions); Complaint ]] 4-14, Nat'l Payment Network, Inc., No. 
C-4521 (F.T.C. May 4, 2015) (alleging failure to disclose fees 
associated with financing program; misleading savings claims in 
advertisements); Complaint ]] 4-13, Matt Blatt Inc., No. C-4532 
(F.T.C. July 2, 2015) (alleging failure to disclose fees associated 
with financing program; misleading savings claims). Cf. Consent 
Order ]] 10-16, Santander Consumer USA, Inc., CFPB No. 2018-BCFP-
0008 (Nov. 20, 2018) (finding defendant sold GAP product allegedly 
providing ``full coverage'' to consumers with loan-to-value ratios 
(``LTVs'') above 125%, when in fact coverage is limited to 125% of 
LTV).
    \189\ See, e.g., Consumer Fin. Prot. Bureau, ``Supervisory 
Highlights: Issue 12, Summer 2016'' 5 (June 2016), https://files.consumerfinance.gov/f/documents/Supervisory_Highlights_Issue_12.pdf (finding that one or more auto 
lenders deceptively advertised the benefits of their GAP agreement 
products, leaving the impression that these products would fully 
cover the remaining balance of a consumer's loan in the event of 
vehicle loss when, in fact, the product only covered amounts below a 
certain loan to value ratio).
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    Commenters including a number of motor vehicle dealership 
associations requested that the Commission clarify how extensive 
disclosures would need to be to satisfy this provision. One such 
commenter requested that the Commission explain what conduct would be 
required under this paragraph, and expressed concern that, if the 
paragraph required disclosures, such a requirement would affect the 
length of the transaction. Another industry association commenter 
suggested that, in the event dealers provide consumers with a verbal or 
written disclosure stating that such products have costs, limitations, 
or benefits, and stating information about other material aspects, the 
Commission modify its proposal to shift to consumers the burden of 
proving any relevant dealer misrepresentation. An individual commenter 
expressed support for applying Sec.  463.3(a) and (b) to dealer 
advertisements of free lifetime benefits programs and requiring dealers 
to make disclosures about any costs, limitations, benefits, or any 
other aspect of an add-on product or service. The Commission notes that 
paragraphs (a) and (b) of Sec.  463.3 already apply to free lifetime 
benefits programs. Regarding disclosures, the Commission is concerned 
about including additional disclosure requirements beyond the few areas 
included in the Rule, or shifting the burden to consumers to hunt for 
and decipher disclosures, given that the auto finance and lease process 
is already lengthy, complex, document-heavy, and dense. Accordingly, as 
discussed in regard to Sec.  463.3(a), these provisions do not mandate 
set disclosures or allow for disclosures to be used as a shield when 
there are misrepresentations to consumers; rather, they prohibit 
express or implied misrepresentations.\190\
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    \190\ It is well-settled that, if one makes a claim that, absent 
additional information, would mislead a consumer acting reasonably 
under the circumstances about a material fact, such conduct would 
violate the law. See FTC Policy Statement on Deception, supra note 
42, at 2; Int'l Harvester Co., 104 F.T.C. 949, 1057-58 (1984).
---------------------------------------------------------------------------

    Several dealership association commenters pointed to State laws 
that, they contended, may already prohibit misrepresentations about 
add-ons or may otherwise protect consumers. As discussed previously, to 
the extent there may be duplication between the provisions the 
Commission is finalizing and other laws, there is no evidence that 
duplicative misrepresentation prohibitions have harmed consumers or 
competition. Moreover, the Final Rule provides additional remedies that 
will benefit consumers who encounter conduct that is already illegal 
under State or Federal law and will assist law-abiding dealers that 
presently lose business to competitors that act unlawfully. Under Sec.  
463.9, States may provide more or less specific requirements relating 
to motor vehicle dealers so long as those requirements are not 
inconsistent with part 463, and in the event of an inconsistency, the 
Rule only affects such State law to the extent of the inconsistency.
    Based on a review of the comments and the responses discussed, the 
Commission adopts paragraph (b) of Sec.  463.3 without substantive 
modification. As discussed in SBP III.C.1, the Commission has 
determined to modify the introductory paragraph of Sec.  463.3 from the 
Commission's original proposal so that each paragraph of Sec.  463.3 
prohibits misrepresentations regarding material information. As such, 
the Commission is finalizing a version of Sec.  463.3(b) that removes 
what would

[[Page 615]]

otherwise be redundant explicit reference to the term ``Material.'' 
This provision prohibits misrepresentations regarding ``[a]ny costs, 
limitation, benefit, or any other aspect of an Add-on Product or 
Service.'' Misrepresentations regarding add-ons are likely to affect a 
consumer's conduct, including the consumer's decision to purchase the 
product or service.
(c) Whether Terms Are, or Transaction Is, for Financing or a Lease
    Proposed Sec.  463.3(c) prohibited misrepresentations regarding 
whether the terms are, or the transaction is, for financing or a lease. 
Upon review and consideration of public comments, the Commission is 
finalizing paragraph (c) of Sec.  463.3 without modification from the 
Commission's original proposal.
    A few industry association and individual commenters posited that 
this proposed provision was unnecessary, either because other statutes 
or regulations, including TILA and some State regulations, address this 
issue, or because vehicle manufacturers already monitor such 
misrepresentations. As noted in SBP III.C.1, even given the possibility 
of overlap between this provision and existing Federal or State law, 
there is no evidence that duplicative misrepresentation prohibitions 
have harmed consumers or competition. Further, given that the conduct 
covered by this provision is already unlawful under the FTC Act and may 
duplicate other laws, or be prohibited by manufacturer rules, it should 
not be difficult to follow this provision.\191\
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    \191\ The FTC has alleged that misrepresentations that 
particular terms are available for financing or for a lease violate 
the FTC Act. See Complaint ]] 38-39, Fed. Trade Comm'n v. Tate's 
Auto Ctr., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 2018) (alleging 
false ads touting attractive terms but concealing ads were for lease 
offers only); Complaint ]] 10, 13, TC Dealership, L.P., No. C-4536 
(F.T.C. Aug. 13, 2015) (same); Complaint ]] 9-12, Cowboy AG, LLC, 
No. C-4639 (F.T.C. Jan. 4, 2018) (same); Complaint ]] 36-38, United 
States v. New World Auto Imports, Inc., No. 3:16-cv-02401-K (N.D. 
Tex. Aug. 18, 2016) (alleging misrepresentation that terms were for 
financing instead of leasing); Complaint ]] 28-37, 44, Fed. Trade 
Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. 
Sept. 29, 2016) (alleging advertisements with key terms that were 
not generally available).
---------------------------------------------------------------------------

    Accordingly, after careful consideration, the Commission adopts 
paragraph (c) of Sec.  463.3 as proposed. Misrepresentations regarding 
whether terms are, or a transaction is, for financing or a lease are 
likely to affect a consumer's conduct, including by causing consumers 
to enter into a monetary transaction for a product they do not want, 
or, if the true circumstances are revealed prior to consummation of the 
transaction, to waste time traveling to, and potentially spending hours 
at, the dealership.
(d) The Availability of Any Rebates or Discounts That Are Factored Into 
the Advertised Price but Not Available to All Consumers
    Proposed Sec.  463.3(d) prohibited misrepresentations concerning 
the availability of any rebates or discounts that are factored into the 
advertised price but not available to all consumers. Upon review and 
consideration of public comments, the Commission is finalizing 
paragraph (d) of Sec.  463.3 without modification from the Commission's 
original proposal.
    Comments in support of this proposed provision, including those 
from a group of State attorneys general and from two United States 
Senators, generally contended that the proposed provision would 
increase the transparency of the purchase transaction by requiring 
dealers to be honest when they advertise the availability of discounts.
    An individual commenter suggested that the Commission modify 
proposed Sec.  463.3(d) to require dealers to disclose all 
representations regarding rebates or discounts in writing, in a clear 
and conspicuous manner. The Commission notes this paragraph prohibits 
misrepresentations regardless of the medium. Further, this paragraph 
focuses on misrepresentations; disclosures regarding price, add-ons, 
and total of payments are addressed in the discussion of Sec.  463.4, 
as is a discussion of why the Commission has determined not to include 
additional disclosure requirements in this Final Rule. The same 
commenter also requested that the Final Rule text include examples of 
situations where discounts or rebates may not be available. The 
Commission describes examples here rather than adding them to the Final 
Rule text, as it would be difficult to anticipate all such examples and 
the text would become unwieldy. Examples include where an advertised 
rebate or discount applies only to the most expensive version of a 
particular vehicle make and model or is only available to consumers 
with high credit scores.
    The Commission received comments from a dealership association and 
an individual commenter asking for additional detail about proposed 
Sec.  463.3(d), pointing to a State regulation that includes 
disclosures and asking which types of rebates the provision covers. 
Here, the Commission notes that, as the language in Sec.  463.3(d) 
states, this provision applies to ``any rebates and discounts'' 
advertised by dealers, and is not limited to any particular type of 
rebate or discount.\192\ The terms in this provision may be interpreted 
according to their plain meaning, as they are commonly used and 
understood.\193\ Additionally, the language of this provision, the 
NPRM, and Commission enforcement actions provide further context. In 
proposing Sec.  463.3(d) to specifically address the availability of 
discounts and rebates, the Commission included additional language 
(``that are factored into the advertised price but not available to all 
consumers'') to describe the manner in which such misrepresentations 
often occur: a dealer represents an advertised price which includes a 
discount or rebate that is not generally available to consumers.\194\ 
The NPRM's discussion of proposed Sec.  463.3(d) described both a 
scenario in which a dealer advertised a rebate or discount separately, 
and one in which rebates or discounts are factored into the advertised 
price but the rebates and discounts are not available to a typical 
consumer. The conduct in either such scenario would violate this 
provision and, depending on the circumstances, may violate other 
provisions the Commission is finalizing, such as paragraph (a) of Sec.  
463.3. Enforcement actions cited in the NPRM provide further 
illustration of deceptive practices involving rebates and 
discounts.\195\ The Commission declines

[[Page 616]]

to add additional requirements, such as disclosure requirements, to its 
Final Rule, given the already lengthy, complex, and document-heavy 
nature of auto transactions.
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    \192\ Section 463.3(d) (emphasis added).
    \193\ See, e.g., Rebate, Cambridge Dictionary, https://dictionary.cambridge.org/us/dictionary/english/rebate (last visited 
Dec. 5, 2023) (defining ``rebate'' as ``an amount of money that is 
returned to you, especially by the government, for example when you 
have paid too much tax'' or ``an amount of money that is paid back 
to you after you have paid too much''); Discount, Cambridge 
Dictionary, https://dictionary.cambridge.org/us/dictionary/english/discount (last visited Dec. 5, 2023) (``[A] reduction in the usual 
price'').
    \194\ See NPRM section IV.C, 87 FR at 42020 (proposed Sec.  
463.3(d) prohibited misrepresentations concerning ``[t]he 
availability of any rebates or discounts that are factored into the 
advertised price but not available to all consumers,'' and the NPRM 
explained ``[w]hen dealers advertise rebates and discounts, or offer 
prices that factor in such rebates and discounts, but in fact those 
rebates and discounts are not available to the typical consumer, but 
only a select set of customers, such conduct induces the consumer to 
select and transact with the dealer under false pretenses'').
    \195\ See, e.g., Complaint ]] 6-13, Jim Burke Auto., Inc., No. 
C-4523 (F.T.C. May 4, 2015) (alleging promises of prices and 
discounts not generally available to consumers); Complaint ]] 6, 9, 
TT of Longwood, Inc., No. C-4531 (F.T.C. July 2, 2015) (alleging 
promises of prices and discounts not generally available to 
consumers); Complaint ]] 8-9, JS Autoworld, Inc., No. C-4535 (F.T.C. 
Aug. 13, 2015) (alleging false ads touting prices but concealing 
discounts with material eligibility limitations); Complaint ]] 7-9, 
TC Dealership, L.P., No. C-4536 (F.T.C. Aug. 13, 2015) (alleging 
false ads touting attractive prices but concealing discounts were 
subject to material eligibility limitations and trade-in 
requirement); Complaint ]] 4-5, Timonium Chrysler, Inc., No. C-4429 
(F.T.C. Jan. 28, 2014) (alleging dealership advertised internet 
prices and dealer discounts but failed to disclose consumer would 
have to qualify for multiple rebates not generally available to 
them); Complaint ]] 4-5, Ganley Ford West, Inc., No. C-4428 (F.T.C. 
Jan. 28, 2014) (alleging dealership advertised discounts on vehicle 
prices, but failed to disclose discounts were only available on the 
most expensive models).
---------------------------------------------------------------------------

    A number of dealership association commenters contended that the 
proposed paragraph would prohibit dealers from displaying beneficial 
information to consumers or would prohibit dealers from advertising 
rebates and incentives of limited availability. In addition, commenters 
including one such dealership association requested that the Commission 
adopt an approach the commenter contended is used in some States: 
allowing dealers to display, below the advertised sales price, a rebate 
or incentive that is not available to all purchasers. Moreover, a 
number of industry association and dealership association commenters 
argued that the proposed paragraph was more stringent than, and 
inconsistent with, the Commission's prior articulation of the deception 
standard, further noting the existence of Commission orders that 
prohibit defendants from representing that a price, discount, rebate, 
or other incentive is available, unless it is in fact available to all 
or unless a defendant provides a clear and conspicuous disclosure of 
any qualifications or restrictions. Section 463.3(d) prohibits 
misrepresentations; it does not prohibit a dealer from advertising, in 
a truthful manner, rebates or discounts with limitations. Thus, this 
paragraph allows for the representation of limited offers, as long as 
such representation is truthful, and any limitations are clear and 
conspicuous to consumers. The paragraph is also consistent with the 
Commission's prior enforcement order practice in this area, which both 
prohibits misrepresentations regarding rebates and prohibits 
representations regarding rebates without disclosing any material 
qualifications or restrictions.\196\ The paragraph simply contains one 
of these prohibitions but not the second.
---------------------------------------------------------------------------

    \196\ See, e.g., Decision and Order, Timonium Chrysler, Inc., 
No. C-4429 (F.T.C. Jan. 28, 2014).
---------------------------------------------------------------------------

    A dealership association commenter expressed concern that this 
proposed provision would penalize dealers if consumers were to confuse 
a rebate or discount offered for one vehicle with a vehicle that does 
not contain such an offer. As under current law, dealers are prohibited 
under Sec.  463.3(d) from both express and implied misrepresentations. 
If, for example, a dealer states or implies that a discount is 
available on several types of vehicles when, in truth, the discount is 
only available on one such type of vehicle, such conduct would violate 
this paragraph. If, alternatively, the dealer does not state or imply 
that a discount is available for several types of vehicles, and offers 
a discount for one type of vehicle, this conduct would not violate this 
paragraph, as long as the dealer makes no other express or implied 
misrepresentations.
    After careful review of the comments, the Commission is adopting 
paragraph (d) of Sec.  463.3 as proposed. When dealers advertise 
rebates or discounts in a misleading manner, including when such 
rebates or discounts are not available to the typical consumer, or 
apply only to the most expensive versions of the make and model,\197\ 
such conduct induces consumers to select and transact with the dealer 
under false pretenses.\198\
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    \197\ See Complaint ]] 4-5, Ganley Ford West, Inc., No. C-4428 
(F.T.C. Jan. 28, 2014) (alleging false ads touting price discount 
but concealing offer was limited to certain high-end models).
    \198\ See Complaint ]] 8-9, JS Autoworld, Inc., No. C-4535 
(F.T.C. Aug. 13, 2015) (alleging false ads touting prices but 
concealing discounts with material eligibility limitations); 
Complaint ]] 7-9, TC Dealership, L.P., No. C-4536 (F.T.C. Aug. 13, 
2015) (alleging false ads touting attractive prices but concealing 
discounts were subject to material eligibility limitations and 
trade-in requirement); Complaint ] 14, TXVT Ltd. P'ship, No. C-4508 
(F.T.C. Feb. 12, 2015) (alleging false ads failed to disclose that 
it would match consumers' income tax refunds only up to $1,000); 
Complaint ]] 4-5, Timonium Chrysler, Inc., No. C-4429 (F.T.C. Jan. 
28, 2014) (alleging false ads touting pricing and discounts but 
concealing material qualifications and restrictions); Complaint ]] 
6, 9, TT of Longwood, Inc., No. C-4531 (F.T.C. July 2, 2015) 
(alleging promises of prices and discounts not generally available 
to consumers); Complaint ]] 6-13, Jim Burke Auto., Inc., No. C-4523 
(F.T.C. May 4, 2015) (alleging promises of prices and discounts not 
generally available to consumers); see also Auto Buyer Study, supra 
note 25, at 8 (``A number of [study] participants were attracted by 
promotional offers in ads that they did not qualify for, but did not 
realize that they did not qualify until they got to the dealer. Some 
did not learn that they did not qualify until they got to the 
financing stage of the transaction.'').
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(e) The Availability of Vehicles at an Advertised Price
    Proposed Sec.  463.3(e) prohibited misrepresentations regarding the 
availability of vehicles at an advertised price. Upon reviewing the 
comments pertaining to this provision, the Commission is finalizing 
paragraph (e) of Sec.  463.3 largely as proposed, with the minor 
modification of capitalizing the defined term ``Vehicles.''
    One individual commenter recommended that proposed Sec.  463.3(e) 
be expanded to prohibit certain specific misrepresentations about 
advertised vehicle availability, including whether any specific vehicle 
is already reserved for another consumer; whether the availability is 
subject to a requirement that the consumer pay a deposit; and regarding 
the amount of time until the vehicle becomes available. Another 
individual commenter recommended that the Rule require disclosure of 
how long each vehicle has been in the dealer's inventory, to prevent 
dealers from misrepresenting that a vehicle recently became available. 
Here, the Commission notes that, to the extent any such 
misrepresentations regarding the availability of vehicles were made 
with express or implied reference to the price of the vehicle, each 
would be prohibited by Sec.  463.3(e).\199\ Furthermore, to the extent 
such misrepresentations included reference to the subject of another 
paragraph of Sec.  463.3, they would be prohibited by the Final Rule. 
For example, if an advertisement were to make a claim about the monthly 
payment for a specific vehicle, but the vehicle is not actually 
available, it would be covered under the bar against misrepresentations 
regarding costs or terms in paragraph (a) of Sec.  463.3. In addition, 
under the Final Rule, dealers are also subject to disclosure 
requirements under Sec.  463.4, including the requirement at Sec.  
463.4(a) to disclose the vehicle's offering price in any advertisement 
that references a specific vehicle, or any monetary amount or financing 
term for any vehicle. And if a dealer discloses the offering price for 
a vehicle, but the vehicle is not available to consumers, Sec.  
463.3(e) applies. Beyond this, the Commission will continue to monitor 
whether other misrepresentations regarding availability are being made 
without reference to price, or to the subject of another paragraph of 
Sec.  463.3, to determine whether additional action is warranted.
---------------------------------------------------------------------------

    \199\ The commenter also expressed concern about 
misrepresentations regarding the refundability of deposits and 
recommended that the Commission include language in Sec.  463.3(e) 
addressing this issue. Because representations and practices 
regarding the refundability of deposits are related to the costs or 
terms of purchasing, financing, or leasing a vehicle, this issue is 
covered by Sec.  463.3(a). Thus, the Commission declines to adopt 
the commenter's recommendation.
---------------------------------------------------------------------------

    The Commission received comments from a number of dealership 
associations and individuals requesting that the Final Rule limit 
dealers' responsibility for unanticipated delays, or otherwise 
expressing concern about

[[Page 617]]

how dealers would be able to comply with this proposed provision. One 
industry association commenter stated that unanticipated delays could 
result from factors beyond the reasonable control of the dealer, such 
as shipping or production issues. Other dealership association 
commenters contended that, because of supply chain disruptions, 
adjustments to inventory and other information may not always be 
displayed on a retailer's website instantaneously.
    As is the case under current law, under this provision, dealers may 
not make claims about the availability of vehicles at an advertised 
price without a reasonable basis at the time the claims are made.\200\ 
Objective claims about products or services represent, explicitly or by 
implication, that an advertiser has a reasonable basis to support those 
claims.\201\ Consumers would be less likely to be affected by claims 
for products and services if they knew the advertiser did not have a 
reasonable basis for believing them to be true.\202\ If a dealer has a 
reasonable basis to make a claim about the availability of vehicles at 
the time the claim is made, the dealer would not be in violation of the 
provision if a vehicle later becomes unavailable because of 
circumstances that a dealer could not reasonably anticipate or control.
---------------------------------------------------------------------------

    \200\ FTC Policy Statement on Deception, supra note 42, at 1 n.5 
(``Advertising that lacks a reasonable basis is also deceptive.'') 
(citing Firestone Tire & Rubber Co., 81 F.T.C. 398, 451-52 (1972) 
(additional citations omitted)); see Fed. Trade Comm'n v. US Sales 
Corp., 785 F. Supp. 737, 748 (N.D. Ill. 1992) (``Apart from 
challenging the truthfulness of an advertiser's representations, the 
FTC may challenge the representation as unsubstantiated if the 
advertiser lacked a reasonable basis for its claims.''); see also 
Fed. Trade Comm'n v. Am. Screening, LLC, 4:20-CV-01021-RLW (E.D. Mo. 
July 14, 2022) (granting summary judgment for the FTC upon finding 
that American Screening's claim that its COVID-19 protective 
equipment was available and would ship quickly was false and lacked 
a reasonable basis); Fed. Trade Comm'n v. John Beck Amazing Profits, 
LLC, 865 F. Supp. 2d 1052 (C.D. Cal. 2012) (finding that the 
defendants' representations were unsubstantiated in violation of 
section 5, because Defendants conceded that during the time period 
in which their infomercial was aired they did not have evidence 
supporting their representations that consumers who purchased their 
product would be able to earn money easily and because survey 
results revealed that less than one percent of consumers actually 
generated any revenue or profits); Fed. Trade Comm'n v. Elegant 
Sols., Inc., 8:19-cv-01333-JVS-KES (C.D. Cal., July 6, 2020) 
(finding that defendants made false or unsubstantiated 
representations, including representing that consumers would be 
enrolled in a repayment plan that may be forgiven after a specific 
number of years even though there were no Federal loan forgiveness 
programs with those repayment terms).
    \201\ Fed. Trade Comm'n, ``FTC Policy Statement Regarding 
Advertising Substantiation,'' (appended to In re Thompson Med. Co., 
Inc., 104 F.T.C. 648, 839 (1984)); Fed. Trade Comm'n v. John Beck 
Amazing Profits, LLC, 865 F. Supp. 2d 1052, 1067 (C.D. Cal. 2012).
    \202\ Fed. Trade Comm'n, ``FTC Policy Statement Regarding 
Advertising Substantiation,'' (appended to In re Thompson Med. Co., 
Inc., 104 F.T.C. 648, 839 (1984)); see Fed. Trade Comm'n v. Am. 
Screening, LLC, 4:20-CV-01021-RLW (E.D. Mo., July 14, 2022) 
(granting FTC's motion for summary judgment and finding that 
Defendants' representations that it had protective equipment in 
stock and would ship it to consumers within seven to ten business 
days were material to consumers seeking such equipment during a 
global pandemic).
---------------------------------------------------------------------------

    A few dealership association commenters claimed that promulgation 
of Sec.  463.3(e) would cause regulatory confusion because State 
guidelines or rules already address issues about the availability of 
vehicles, including, for example, by requiring dealers to note the 
location of the vehicle.\203\ As described in SBP III.C.1, States may 
provide more or less specific requirements relating to motor vehicle 
dealers so long as those requirements are not inconsistent with part 
463, and in the event of an inconsistency, the Rule only affects such 
State law to the extent of the inconsistency. To the extent there are 
actual inconsistencies, Sec.  463.9 is clear that this Rule's 
prohibition against misrepresentations controls.
---------------------------------------------------------------------------

    \203\ This provision would not prohibit dealers from advertising 
a vehicle with limitations on availability in a truthful manner, 
such that any limitations are clear and conspicuous to the consumer. 
For example, dealers should not affirmatively represent that a 
vehicle is available on its lot without a reasonable basis that the 
vehicle is on the lot or without clearly and conspicuously noting 
that the vehicle will be made available after transfer from an 
affiliate's lot.
---------------------------------------------------------------------------

    After careful consideration of the comments, the Commission is 
adopting paragraph (e) of Sec.  463.3 largely as proposed, with the 
minor modification of capitalizing the defined term ``Vehicles.'' This 
paragraph prohibits dealers from promoting low prices for specific 
vehicles, but then later misrepresenting, among other things, that the 
advertised vehicle is no longer available or no longer available at the 
advertised price. Such misrepresentations are likely to induce 
consumers to waste their time traveling to a particular dealership to 
pursue a specific offer on a specific vehicle when the offer or vehicle 
itself may not actually be available.
(f) Whether Any Consumer Has Been or Will Be Preapproved or Guaranteed 
for Any Product, Service, or Term
    Proposed Sec.  463.3(f) prohibited misrepresentations regarding 
whether a consumer has been or will be preapproved or guaranteed for 
any product, service, or term. Upon reviewing public comments, the 
Commission is finalizing paragraph (f) of Sec.  463.3 without 
modification from the Commission's original proposal.
    One dealership association commenter recommended that compliance 
with a State law that prohibits certain misleading statements, such as 
``we finance anyone'' and ``no credit rejected'' and similar 
statements, should function as a safe harbor against liability under 
this proposed paragraph.\204\ Yet, while compliance with the State law 
cited may require dealers to refrain from using certain frequently 
misleading statements, as described by the commenter, that law does not 
generally prohibit all misrepresentations regarding material 
information about consumer preapprovals or guarantees; even if it did, 
there is no evidence that duplicative laws prohibiting 
misrepresentations harm consumers or competition, and no evidence of 
benefits to consumers or competition in allowing one such law to act as 
a safe harbor against another such law. Further, given that current law 
already prohibits deceptive conduct generally, dealers should be able 
to comply with the Commission's Rule, which provides further 
protections for consumers and law-abiding dealers. Thus, the Commission 
declines to adopt the recommended safe harbor.
---------------------------------------------------------------------------

    \204\ Comment of Tex. Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8102 at 21; see 43 Tex. Admin. Code 215.247(2) (2023).
---------------------------------------------------------------------------

    Therefore, after careful consideration, the Commission is 
finalizing paragraph (f) of Sec.  463.3. Misrepresentations regarding 
preapproval or guarantees for a product, service, or term--as with 
misrepresentations about availability and price, described previously--
are likely to impact consumers' conduct with regard to motor vehicle 
sales, financing, or leasing transactions, including by inducing 
consumers to waste time pursuing illusory offers.
(g) Any Information on or About a Consumer's Application for Financing
    Proposed Sec.  463.3(g) prohibited dealers from misrepresenting any 
material information on or about a consumer's application for 
financing. After carefully reviewing public comments, the Commission is 
adopting paragraph (g) of Sec.  463.3 without substantive modification. 
As with Sec.  463.3(b), the only adopted modification is the deletion 
of the term ``Material,'' which nonetheless applies to the operation of 
each of the misrepresentation paragraphs in Sec.  463.3, including 
paragraph (g), through the addition of the term in the introductory 
paragraph of Sec.  463.3.

[[Page 618]]

    The Commission received a number of comments regarding this 
provision, including comments that expressed support for prohibiting 
misrepresentations about a consumer's application for financing.
    A credit union commenter requested that, in addition to this 
proposal, the Commission consider implementing a requirement to clearly 
and conspicuously disclose any potential financing limitations prior to 
vehicle purchase negotiations, contending that such a measure would 
better enable consumers to choose a motor vehicle dealer and financing 
option that best serves their needs. To the extent a dealer 
misrepresents a consumer's financing options or limitations, including 
prior to or during the process of selling, leasing, or arranging 
financing for a vehicle, such conduct is prohibited by this provision, 
and depending on the circumstances, may also violate other provisions 
of the Rule. For example, as discussed in this paragraph-by-paragraph 
analysis, Sec.  463.3(a) of the Final Rule prohibits misrepresentations 
regarding the cost or terms of financing a vehicle; this prohibition 
includes misrepresentations about available vehicle financing. 
Furthermore, this provision pertains to misrepresentations; comments 
pertaining to proposed disclosures regarding price, add-ons, and total 
of payments are examined in the Commission's discussion of Sec.  463.4, 
wherein the Commission explains its determination not to finalize any 
additional disclosure requirements not included in its NPRM.
    An individual commenter, while expressing support for regulation of 
such misrepresentations, also noted concern for the ``grave 
consequences of falsifying information on a customer's application for 
financing,'' and urged the Commission to consult with other law 
enforcement agencies to further address such problems.\205\ The 
Commission appreciates the concern and the seriousness of falsifying 
information on a consumer's application for financing, and coordinates 
regularly with other law enforcement agencies regarding areas of shared 
jurisdiction and responsibility, including motor vehicle sales and 
financing. The Commission will continue to monitor financing 
application falsification issues to determine whether any additional 
action, beyond Sec.  463.3(g), is needed.
---------------------------------------------------------------------------

    \205\ Individual commenter, Doc. No. FTC-2022-0046-7445 at 12.
---------------------------------------------------------------------------

    A number of dealership association commenters contended that the 
proposed language was vague and did not adequately explain the type of 
behavior this paragraph would prohibit. Relatedly, some dealership 
association commenters contended that this provision lacked specific 
guidance about what a motor vehicle dealer must or must not disclose. 
This provision, however, utilizes terms which are commonly used and 
understood, and which may be interpreted according to their plain 
meaning. Read together with the introductory paragraph of Sec.  463.3, 
Sec.  463.3(g) prohibits misrepresentation . . . regarding material 
information about ``[a]ny information on . . . a consumer's application 
for financing.'' By its terms, this prohibition includes any 
misrepresentations of material information on a financing application. 
For example, dealers would make misrepresentations in violation of this 
provision by including, on a consumer's application that is submitted 
to a third-party financing institution, consumer income information 
that is different from what the consumers have stated to the dealer 
that the consumers actually earn, or by representing a different down 
payment amount than the amount the consumer has actually provided, or 
by misrepresenting that the vehicle is being sold or leased with 
certain add-on products.\206\ Moreover, as described in detail with 
regard to other paragraphs of Sec.  463.3, this provision does not 
require any particular affirmative disclosures, instead obligating 
dealers to refrain from certain misrepresentations.
---------------------------------------------------------------------------

    \206\ See Complaint ]] 18-36, Fed. Trade Comm'n v. Tate's Auto 
Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 
2018); Consumer Fin. Prot. Bureau, ``Supervisory Highlights: Issue 
30, Summer 2023'' 5 (July 2023), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-30_2023-07.pdf 
(finding that dealers ``fraudulently included'' in financing 
documents add-ons, such as undercoating, that were not actually 
present on the vehicle, creating ``improperly inflated loan 
amounts'' that caused consumers to pay improper additional 
interest).
---------------------------------------------------------------------------

    One dealership association commenter questioned whether a dealer 
would be held responsible for a customer's false statement about his or 
her income. If a consumer falsely states they have a higher income, 
that consumer would not be misled into thinking he has a higher income. 
If, however, a consumer's application falsely states a higher income 
because a dealer has altered the information, that consumer would be 
misled into thinking that the application they are signing accurately 
reflects the information the consumer provided, and Sec.  463.3(g) 
would be violated. Additionally, if a dealer advises a consumer to 
include other sources of payment as income or advises the consumer to 
list a higher income in other ways, such conduct may mislead the 
consumer into thinking that it is proper to calculate income for auto 
retail installment contracts in a particular way, and there may be a 
violation of Sec.  463.3(g).
    After careful review and consideration of the comments, the 
Commission adopts paragraph (g) of Sec.  463.3 without substantive 
modification, prohibiting misrepresentations regarding material 
information about any information on or about a consumer's application 
for financing. It is likely to affect a consumer's choices if the 
consumer knows a dealer is misrepresenting the consumer's income, or 
other aspects of financing applications. If, for example, a consumer 
knew the truth--that the dealer is inflating the consumer's income such 
that the consumer would not otherwise obtain financing for a particular 
vehicle--the consumer might opt to finance a less expensive car, rather 
than risking repossession. Material misrepresentations on consumers' 
financing paperwork are also likely to cause consumers substantial 
injury, including by causing them to take on debt beyond that which the 
financing company would have approved, and increasing the risk of 
repossession and harmful consequences to consumers' credit. Consumers 
cannot avoid the injury from dealers misrepresenting the information 
consumers provide them, and this practice provides no countervailing 
benefits to consumers or competition.
(h) When the Transaction Is Final or Binding on All Parties
(i) Keeping Cash Down Payments or Trade-In Vehicles, Charging Fees, or 
Initiating Legal Process or Any Action If a Transaction Is Not 
Finalized or If the Consumer Does Not Wish To Engage in a Transaction
    Proposed Sec.  463.3(h) prohibited dealers from misrepresenting 
when the transaction is final or binding on all parties. Proposed Sec.  
463.3(i) prohibited dealers from making misrepresentations about 
keeping cash down payments or trade-in vehicles, charging fees, or 
initiating legal process or any action if a transaction is not 
finalized or if the consumer does not wish to engage in a transaction. 
After careful review and consideration of the comments, the Commission 
is finalizing paragraphs (h) and (i) of Sec.  463.3 with the minor 
modification of capitalizing the defined term ``Vehicles'' in Sec.  
463.3(i) to conform with the revised definition at Sec.  463.2(e).
    Some commenters, including a group of State attorneys general and 
consumer

[[Page 619]]

advocacy organizations, generally supported prohibiting 
misrepresentations about when the transaction is final or binding on 
all parties but urged the Commission to include additional requirements 
or prohibitions. For instance, several commenters, including consumer 
advocacy organizations and individual commenters, requested that the 
Commission add to its Final Rule a provision requiring dealers to 
include, in every consumer credit contract, a finality clause stating 
that the transaction is final as soon as the consumer credit contract 
is signed, or alternatively, a provision requiring dealers to include 
in retail installment contracts a clause prohibiting financing-
contingent sales. Commenters including a group of State attorneys 
general recommended that the Commission require any dealer that does 
not ultimately secure financing under previously presented terms to 
unwind the transaction, return any down payment in full, and return any 
traded-in vehicle. Such commenters also recommended that the Commission 
implement restrictions, such as requiring dealers to be reasonably 
certain that a consumer will qualify for quoted financing terms; 
requiring a written disclosure that the consumer must sign advising the 
consumer that financing is not final; or setting a short deadline by 
which the dealer must either arrange financing or cancel the 
transaction. Other commenters, including a State consumer protection 
agency, also supported requiring the contractual contingency to be 
disclosed conspicuously and limiting the contingency to a short period 
of time. A number of these commenters, including consumer advocacy 
organizations, provided examples of how spot delivery transactions can 
harm consumers.
    The provision's prohibitions and requirements address many of these 
commenters' concerns regarding spot delivery and yo-yo financing. Spot 
delivery and yo-yo financing refer to situations where a dealer 
delivers a vehicle to a consumer on the spot before the financing or 
leasing has been finalized, leads a consumer to believe that the 
transaction is final, and then later directs the consumer to return the 
vehicle and engages in certain tactics, such as failing to return the 
consumer's trade-in vehicle while refusing to honor the finance or 
lease transaction, or pressuring the consumer to enter into a new 
transaction.\207\ Paragraphs (h) and (i) of Sec.  463.3 prohibit 
misrepresentations regarding the finality of the transaction and return 
of down payments and trade-in vehicles. Under these provisions, if a 
consumer is under the impression that the transaction is final, and the 
dealer subsequently causes the consumer to return the vehicle to the 
lot because the transaction was not final, or the dealer takes or 
threatens to take possession of the vehicle but refuses to return the 
down payment or trade-in vehicle, the dealer has violated either Sec.  
463.3(h), by misrepresenting the finality of the transaction, or Sec.  
463.3(i), by falsely representing, expressly or by implication, that 
the dealer has a legal basis to keep the down payment or trade-in 
vehicle in the event the transaction is not finalized, or both.\208\
---------------------------------------------------------------------------

    \207\ Complaint ]] 67-72, Fed. Trade Comm'n v. Universal City 
Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016); State ex 
rel. Dewine v. Dads Car Lot Inc., No. 13-cv-4036, 2014 BL 468717, at 
* 1 (Ohio Com. Pl. June 6, 2014) (finding defendant violated State 
consumer sales practices act by including ``spot delivery'' document 
that allowed defendant to keep ``all funds on deposit''); Att'ys 
Gen. of 31 States & DC, Comment Letter on Public Roundtables: 
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 
Project No. P104811, Submission No. 558507-00112 at 4 (Apr. 13, 
2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00112/00112-82927.pdf 
(recommending, among other rules aimed at deterring yo-yo sales, FTC 
adopt rules that would require dealers to disclose the consumer's 
``right to walk away'' if financing is rejected and, in the context 
of spot delivery, to disclose financing has not been finalized as 
well as the responsibilities and potential consequences for 
consumers); Legal Aid Just. Ctr., Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00066 at 26, 29 
(Jan. 30, 2012), https://downloads.regulations.gov/FTC-2022-0036-0062/attachment_2.pdf (explaining that in a yo-yo sale the dealer 
misrepresents to the consumer that credit has been finalized, when 
in fact the dealer treats the sale as contingent, retaining the 
ability to call off or seize the vehicle later; a ``yo[hyphen]yo 
case can result in substantial distress to the person who has been 
tricked''; and ``[t]he harm to the marketplace occurs when the 
consumer believes a credit sale has been completed and stops 
shopping for a car on credit''); Nat'l Consumer L. Ctr., ``In Harm's 
Way--At Home: Consumer Scams and the Direct Targeting of America's 
Military and Veterans'' 41 (May 2003), https://filearchive.nclc.org/special_projects/military/report-scams-facing-military.pdf (listing 
``Spot Delivery'' or ``yo-yo sales'' among scams commonly aimed at 
military members).
    \208\ See Orkin Exterminating Co., Inc., 108 F.T.C. 263 (1986), 
aff'd sub nom. Orkin Exterminating Co. v. F.T.C., 849 F.2d 1354 
(11th Cir. 1988) (finding that defendant's practice of unilaterally 
raising consumers' annual renewal fees where the consumers' 
contracts contained a ``lifetime guarantee'' as to the amount of the 
fee was unfair under section 5 of the FTC Act); see also First 
Amended Complaint ]] 59-61, Fed. Trade Comm'n v. BF Labs, Inc., No. 
4:14-cv-00815 (W.D. Mo. May 14, 2015) (alleging as unfair 
defendants' practice of unilaterally failing to provide paid-for 
services while refusing to refund consumers' upfront payments).
---------------------------------------------------------------------------

    Regarding the recommendation to include a requirement that dealers 
be reasonably certain that consumers will qualify for quoted financing 
terms, the Rule the Commission is finalizing already contains several 
provisions in addition to Sec.  463.3(h) and (i) that address this 
conduct. For example, the Rule prohibits misrepresentations regarding 
material information about the costs or terms of financing (Sec.  
463.3(a)), or about whether any consumer has been or will be 
preapproved or guaranteed for any product, service, or term (Sec.  
463.3(f)). As explained in the paragraph-by-paragraph analysis of Sec.  
463.3(e) in SBP III.C.2(e), existing law requires dealers to have a 
reasonable basis for their claims. Objective claims about products or 
services represent, explicitly or by implication, that an advertiser 
has a reasonable basis to support those claims.\209\ Thus, to avoid 
misrepresentation, dealers must reasonably believe that consumers will 
qualify for quoted financing terms, or that the transaction will be 
finalized on the terms presented, in order to represent such terms to 
consumers.
---------------------------------------------------------------------------

    \209\ Fed. Trade Comm'n, ``FTC Policy Statement Regarding 
Advertising Substantiation,'' (appended to In re Thompson Med. Co., 
Inc., 104 F.T.C. 648, 839 (1984)); Fed. Trade Comm'n v. John Beck 
Amazing Profits, LLC, 865 F. Supp. 2d 1052, 1067 (C.D. Cal. 2012).
---------------------------------------------------------------------------

    Regarding additional provisions that would require certain 
contractual measures, such as finality clauses or prohibitions against 
financing-contingent sales, the Commission is concerned that requiring 
specific contract provisions would obligate dealers that are not 
engaged in spot delivery to change their contracts even though their 
customers do not experience harm stemming from spot delivery practices. 
Before requiring any such changes, the Commission has determined to 
continue to monitor the market to evaluate whether additional steps are 
warranted.\210\
---------------------------------------------------------------------------

    \210\ On May 31, 2023, the Commission received a petition for 
rulemaking under 16 CFR 1.31 regarding yo-yo financing. Petition for 
Rulemaking Concerning the Finality of a Car Purchase (Yo-Yo 
Financing), Doc. No. FTC-2023-0035-0002. The Commission will address 
this petition separately.
---------------------------------------------------------------------------

    Some commenters, including dealership associations, requested that 
the Commission clarify how dealers could document compliance with these 
proposed provisions, such as how dealers could establish that 
appropriate disclosures had been made. One such commenter, for 
instance, asked whether written agreements required by State law were 
sufficient to satisfy the requirements of these provisions. As noted 
elsewhere in this paragraph-by-paragraph analysis of Sec.  463.3 in SBP 
III.C.2, these provisions do not require any particular affirmative 
disclosures, instead obligating dealers to refrain from

[[Page 620]]

certain misrepresentations. Section 463.6 discusses records dealers 
need to keep to demonstrate compliance with the requirements of the 
Final Rule, and enumerates five such categories of records, including 
copies of finance and lease documents signed by the consumer, whether 
or not final approval is received for a financing or lease transaction. 
The Commission declines to include in this Final Rule additional 
requirements regarding any specific documents dealers must keep in 
order to demonstrate compliance with Sec.  463.3(h) or (i).
    One individual commenter requested that the Commission include in 
the CFR the examples of harmful conduct related to yo-yo financing that 
it published in the NPRM.\211\ The Commission has determined that each 
such example describes conduct that violates this rulemaking. Rather 
than adding them to the text of the Final Rule, the Commission repeats 
those examples in this paragraph-by-paragraph analysis of Sec.  
463.3(h) and (i), in order to avoid voluminous modifications to the 
Rule text itself.
---------------------------------------------------------------------------

    \211\ See NPRM at 42020-21. Individual commenter, Doc. No. FTC-
2022-0046-9469 at 5-6.
---------------------------------------------------------------------------

    Commenters including a dealership association asserted that the 
issue of when a contract is final or binding is one of State law, and 
thus it is within the purview of each State to determine when a 
contract is final or binding, arguing that Sec.  463.3(h) therefore 
should be removed from the Final Rule. Another such commenter contended 
that even courts experienced in contract interpretation have difficulty 
determining when an agreement is final, and that dealers therefore are 
likely to transgress this prohibition in proposed Sec.  463.5(h) 
accidentally. This provision, however, requires that a dealer's express 
or implied representations regarding material information be truthful, 
which is consistent with current law and with the Commission's 
authority to prohibit unfair or deceptive acts or practices. Moreover, 
under Sec.  463.9, this Rule does not affect State law pertaining to 
contracts so long as State law is not inconsistent with part 463, and 
in the event of an inconsistency, the Rule only affects such State law 
to the extent of the inconsistency.\212\ In the case of Sec.  463.3(h), 
for example, an inconsistency would include State law allowing material 
misrepresentations regarding whether transactions are final; the 
Commission is unaware of any such law. Further, to the extent dealers 
are concerned they may transgress this prohibition because courts have 
had difficulty interpreting their contracts, then, as they should be 
doing under current law prohibiting misrepresentations, dealers should 
carefully consider the net impression they are conveying with the 
language they use, both in their contracts and in the context in which 
these contracts are presented, as such language may confuse consumers 
as well.
---------------------------------------------------------------------------

    \212\ One commenter questioned whether this section would 
prohibit a dealer from retaining a down payment on a special order 
vehicle where the customer refuses to take delivery of the vehicle. 
Comment of Minn. Auto. Dealers Ass'n, Doc. No. FTC-2022-0046-8670 at 
10. Sections 463.3(h) and (i) prevent misrepresentations, including 
misrepresenting that a dealer can keep a down payment when a dealer 
does not have a legal basis to do so. If the dealer does not make a 
misrepresentation, this provision would not be violated.
---------------------------------------------------------------------------

    Several dealership association commenters claimed that State law 
already prohibits misrepresentations about spot delivery transactions 
or otherwise protects consumers in such transactions. One such 
commenter asserted that Massachusetts law prohibits spot deliveries, 
and cautioned the FTC not to create uncertainty with its Rule such that 
one might think spot deliveries are allowed in Massachusetts. Another 
such commenter asked whether this provision applies in addition to 
State law or instead of it. Other commenters, including consumer 
advocacy organizations, asserted that less than half of the States have 
statutes, regulations, or administrative pronouncements about yo-yo 
transactions; that there are significant variations in such law from 
State to State; and that State regulation often does not provide 
sufficient protections for consumers. As described throughout the 
paragraph-by-paragraph analysis of Sec.  463.3 in SBP III.C.2, State 
law may provide more or less specific requirements than those under the 
Final Rule as long as those requirements are not inconsistent with part 
463, and in the event of an inconsistency, the Rule only affects such 
State law to the extent of the inconsistency. As for any States that 
prohibit spot delivery, such prohibitions are consistent with the 
provisions of this Rule. Finally, as to whether additional provisions 
are warranted to protect consumers, the Commission will continue to 
monitor the market to make this determination.
    Commenters including an industry association contended that the 
Commission should not take action to disrupt spot delivery transactions 
to consumers, stating that there may be reasons to keep down payments 
even when consumers are not permitted to keep the vehicle, or claiming 
that although abusive spot deliveries have occurred, they are not a 
systemic problem in the marketplace. The Commission, however, need not 
show that abusive spot deliveries are systemic in order to finalize 
these provisions barring misrepresentations.\213\ Further, these 
misrepresentation prohibitions do not alter requirements under current 
law prohibiting dealers from making express or implied 
misrepresentations.
---------------------------------------------------------------------------

    \213\ See SBP I.A, n.3.
---------------------------------------------------------------------------

    After careful consideration of the recommendations and record, the 
Commission has determined to finalize paragraphs (h) and (i) of Sec.  
463.3 largely as proposed, with the minor modification of capitalizing 
the defined term ``Vehicles'' in Sec.  463.3(i). The Commission notes, 
however, that it has significant concerns about consumer harm due to 
yo-yo financing and will continue to examine these issues even as it 
finalizes these prohibitions against certain misrepresentations. 
Misrepresentations about when the transaction is final or binding on 
all parties, as well as about keeping down payments or trade-in 
vehicles, charging fees, or initiating legal process or any action, are 
likely to affect consumer conduct, including regarding whether to enter 
into a new transaction with less beneficial terms for the consumer, and 
are likely to mislead consumers.
(i) Keeping Cash Down Payments or Trade-In Vehicles, Charging Fees, or 
Initiating Legal Process or Any Action If a Transaction Is Not 
Finalized or If the Consumer Does Not Wish To Engage in a Transaction
    Proposed Sec.  463.3(i) is discussed with Sec.  463.3(h).
(j) Whether or When a Dealer Will Pay Off Some or All of the Financing 
or Lease on a Consumer's Trade-in Vehicle
    Proposed Sec.  463.3(j) prohibited misrepresentations regarding 
whether or when a motor vehicle dealer will pay off some or all of the 
financing or lease on a consumer's trade-in vehicle. The Commission is 
finalizing paragraph (j) of Sec.  463.3 largely as proposed, with minor 
modifications--substituting ``Dealer'' for ``Motor Vehicle Dealer'' and 
capitalizing ``Vehicle''--to conform with the revised definitions of `` 
`Covered Motor Vehicle' or `Vehicle' '' and `` `Covered Motor Vehicle 
Dealer' or `Dealer' '' at Sec.  463.2(e) and (f).
    The Commission received several comments in response to this 
paragraph, including from individual commenters who expressed support 
for prohibiting dealers from misrepresenting whether they would pay off 
outstanding balances

[[Page 621]]

remaining on a trade-in vehicle.\214\ Other commenters, including an 
industry association and dealership associations, requested that the 
Commission limit dealer responsibility under this provision for 
unanticipated delays stemming from circumstances beyond a dealer's 
reasonable control, arguing that proposed Sec.  463.3(j) made no 
exception for unanticipated delays such as a previous financing source 
declining to accept a payoff or refusing to release the vehicle title 
after receiving a payoff.\215\ The Commission notes that, as is the 
case under current law, under this provision, dealers are not permitted 
to make claims about whether or when they will pay off some or all of 
the financing or lease on a consumer's trade-in vehicle if the truth of 
those claims depends on circumstances outside their control and the 
dealer does not possess a reasonable basis for such claims.\216\
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    \214\ See, e.g., Individual commenter, Doc. No. FTC-2022-0046-
3770 (``I agree that these changes need to take place. No one should 
have to pay what was owed on a trade in after the dealership said 
they would pay off the trade in . . . .'').
    \215\ For example, commenters stated that occasionally the 
previous finance or lease source will not provide a timely payoff 
for a traded vehicle or will refuse to accept a payoff claiming more 
money is due; or a previous finance or lease source may accept a 
payoff, but will refuse to credit its former customer's account and 
release the title promptly. In addition, an industry association 
commenter requested that the Commission narrow this prohibition to 
specifically address the fact patterns giving rise to it that the 
Commission sets forth in the NPRM, and, in so doing recognize that 
it is in a dealer's business interest to pay off the existing loan 
quickly so that the vehicle can be more easily and quickly retailed.
    \216\ See paragraph-by-paragraph analysis of Sec.  463.3(e) in 
SBP III.C.2(e) (discussing deception and reasonable basis).
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    An individual commenter contended that requiring additional 
disclosures about this provision would confuse the consumer.\217\ This 
provision, however, does not necessitate any affirmative disclosures 
from dealers. Instead, it prohibits dealers from misleading consumers 
about whether or when they will pay off some or all of the financing or 
lease on a consumer's trade-in vehicle.
---------------------------------------------------------------------------

    \217\ See Individual commenter, Doc. No. FTC-2022-0046-7905 at 
1.
---------------------------------------------------------------------------

    One State consumer protection agency commenter requested that the 
Commission require, in situations where a buyer's credit information or 
trade-in vehicle are evidently insufficient to support a deal, that the 
dealer require additional down payment or other security, or 
affirmatively disclose that the dealer is not responsible for paying 
off liens.\218\ Without further information on the costs and benefits 
of such a proposal, the Commission declines to add such requirements to 
this Final Rule. The Commission notes, however, that the Rule prohibits 
dealers from misleading consumers regarding when trade-in vehicles have 
negative equity and from otherwise failing to obtain the consumer's 
express, informed consent prior to charging the consumer for any item, 
including any amounts associated with trading in a vehicle. The 
Commission will continue to monitor this area to determine whether any 
such additional measures are warranted to protect consumers or 
competition.
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    \218\ See Comment of State of S.C. Dep't of Consumer Affs., Doc. 
No. FTC-2022-0046-7891 at 6.
---------------------------------------------------------------------------

    The Commission also received a number of comments from dealership 
associations arguing that existing State and Federal laws address 
dealers' obligations in connection with informing consumers how much 
each consumer is responsible for financing. The Commission notes that 
commenters presented no actual conflicts between this provision and 
other laws, and to the extent duplicative laws prohibit 
misrepresentations in this area, the Commission has not observed 
harmful consequences to consumers or competition. Further, as noted 
elsewhere in the section-by-section analysis, State laws may provide 
more or less specific requirements as long as those requirements are 
not inconsistent with part 463, under Sec.  463.9, and in the event of 
an inconsistency, the Rule only affects such State law to the extent of 
the inconsistency.
    After carefully considering the comments, the Commission is 
finalizing this provision with the two minor modifications to conform 
with the defined terms `` `Covered Motor Vehicle' or `Vehicle' '' and 
`` `Covered Motor Vehicle Dealer' or `Dealer.' '' This provision 
prohibits dealers from making misrepresentations about paying off the 
financing or lease on a trade-in vehicle. Such conduct includes 
misrepresenting to consumers who trade in a vehicle that the dealer 
will pay off any outstanding balance owed on the trade-in vehicle when 
the consumer purchases a vehicle from the dealer. For example, when 
such a dealer takes a trade-in, if the dealer remits payment to the 
entity to whom the trade-in payment is owed, as consumers would expect, 
but also adds this payment to the amount the consumer owes on the 
vehicle the consumer is purchasing from the dealer, the consumer is the 
party that has ultimately paid off the trade-in amount, contrary to the 
impression made by the dealer. This provision also prohibits dealers 
that are going out of business from representing expressly or by 
implication that they will pay off liens if they do not, in fact, pay 
off the liens, or do not pay them off in a timely manner. Such 
misrepresentations are likely to affect a consumer's choice to visit a 
particular dealership or select a particular vehicle.
(k) Whether Consumer Reviews or Ratings Are Unbiased, Independent, or 
Ordinary Consumer Reviews or Ratings of the Dealer or the Dealer's 
Products or Services
    Proposed Sec.  463.3(k) prohibited misrepresentations about whether 
``consumer reviews or ratings are unbiased, independent, or ordinary 
consumer reviews or ratings of the Dealer or its products or 
services.'' Upon careful review and consideration of the comments, the 
Commission is finalizing paragraph (k) of Sec.  463.3 with one 
technical clarification to replace ``its'' with ``the Dealer's.'' The 
Rule's requirements apply to all individuals and entities that meet the 
definition of ``Dealer.''
    An individual commenter recommended that the Commission modify this 
provision to include language explicitly prohibiting dealers from 
creating, editorializing, modifying, or removing consumer reviews.\219\ 
Here, the Commission notes that if such acts or practices would result 
in reviews that are not independent or do not otherwise reflect 
ordinary consumer experience, they already would violate this 
provision. For example, if a dealer created a positive review, edited 
or modified negative reviews to make them sound positive, or removed 
negative reviews while keeping positive reviews, such practices would 
violate this provision.
---------------------------------------------------------------------------

    \219\ Individual commenter, Doc. No. FTC-2022-0046-2364 (``Many 
favorable ([i.e.] 5 star) Dealer reviews I have read appear suspect 
with generic, similar wording (or no wording at all) seemingly 
provided to offset lower Dealer ([i.e.] 1 star) ratings. I recommend 
that for [Sec.  463.3(k)] the following (or similar) be appended: 
Additionally, consumer reviews may not be created, editorialized, 
modified or removed by any Dealer or third party acting at the 
direction of any Dealer. Consumer reviews should be modifiable or 
removable by the originating author.'').
---------------------------------------------------------------------------

    A few individual commenters recommended that the Rule include 
additional provisions related to consumer reviews, including a 
requirement for the creation of an online database for consumer reviews 
and complaints about dealerships, and a requirement for dealers to post 
consumer reviews online and in the dealership location. The Commission 
notes that while some reviews are available online, additional 
information could assist consumers, and the Commission will consider 
whether such

[[Page 622]]

measures are needed as it continues to monitor the marketplace, 
including after the Rule goes into effect.
    Several dealership associations asked what type or format of 
reviews or ratings would be covered by this proposed provision. As 
proposed, Sec.  463.3(k) applied to all reviews or ratings, in any 
format or wherever displayed, that are likely to mislead consumers as 
to whether such reviews or ratings are unbiased, independent, or 
ordinary consumer reviews or ratings. Relatedly, industry and 
dealership associations contended that the language used in the 
proposed provision was vague and confusing, and requested that the 
Commission further define the phrase, ``unbiased, independent, or 
ordinary consumer reviews or ratings.'' To begin, the operative terms 
in this phrase are commonly used and understood and may be interpreted 
according to their plain meaning without further definition. Moreover, 
the Commission has, for decades, provided information and guidance on 
avoiding deception through the use of endorsements, testimonials, and 
online reviews.\220\ Enforcement actions by the Commission have 
documented examples of the types of misrepresentations that would be 
covered by this provision.\221\ For example, dealerships and their 
employees have posted positive, five-star online reviews that falsely 
purport to be objective or independent.\222\ As these sources make 
clear, a person who is unbiased, independent, and an ordinary consumer 
would be someone who was not paid or given something of value to write 
a review and who has no employment or familial relationship or other 
unexpected material connection to the dealership.\223\
---------------------------------------------------------------------------

    \220\ See, e.g., Fed. Trade Comm'n, Notice of Proposed 
Rulemaking, Trade Regulation Rule on the Use of Consumer Reviews and 
Testimonials, 88 FR 49364 (July 31, 2023) (to be codified at 16 CFR 
465), https://www.govinfo.gov/content/pkg/FR-2023-07-31/pdf/2023-15581.pdf; Fed. Trade Comm'n, Guides Concerning Use of Endorsements 
and Testimonials in Advertising, 16 CFR 255; Fed. Trade Comm'n, 
``FTC's Endorsement Guides: What People are Asking,'' https://www.ftc.gov/business-guidance/resources/ftcs-endorsement-guides-what-people-are-asking; Fed. Trade Comm'n, ``Soliciting and Paying 
for Online Reviews: A Guide for Marketers,'' https://www.ftc.gov/business-guidance/resources/soliciting-paying-online-reviews-guide-marketers; Fed. Trade Comm'n, ``Disclosures 101 for Social Media 
Influencers,'' https://www.ftc.gov/business-guidance/resources/disclosures-101-social-media-influencers.
    \221\ See Complaint ]] 73-78, Fed. Trade Comm'n v. Universal 
City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016); see 
also Fed. Trade Comm'n, Notice of Proposed Rulemaking, Trade 
Regulation Rule on the Use of Consumer Reviews and Testimonials, 88 
FR 49364, 49371-75 (July 31, 2023) (to be codified at 16 CFR 465), 
https://www.govinfo.gov/content/pkg/FR-2023-07-31/pdf/2023-15581.pdf 
(discussing such enforcement actions).
    \222\ See Complaint ]] 73-78, Fed. Trade Comm'n v. Universal 
City Nissan, Inc., No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016).
    \223\ One commenter conducted a study of Google reviews of U.S. 
car dealerships from April 2008 to September 2022. The commenter 
found by examining a 2% sample of these reviews that consumers gave 
on average 4.47 stars out of 5 stars and made several other 
conclusions about consumer satisfaction with the auto transaction 
experience based on that methodology. Comment of Inst. for Regul. 
Analysis & Engagement, Doc. No. FTC-2022-0046-10164 at 2-5. The 
Commission notes that, consistent with its enforcement experience, 
there is no guarantee that those reviews are a genuine reflection of 
consumer experience. Moreover, the Commission notes that oftentimes 
consumers do not realize that they have been charged without their 
authorization. See SBP II.B. Thus, such a study that relies on 
Google star ratings is not conclusive of consumer experience.
---------------------------------------------------------------------------

    An industry association commenter expressed concern that this 
proposed provision did not appear to be limited to misrepresentations 
that may occur when a dealership, and not an unrelated third party, 
affirmatively publishes consumer reviews. To the extent an independent 
third party that does not have a material connection with the 
dealership makes any such claims, those claims would not be covered by 
this provision. This provision concerns situations where there is such 
a relationship between the third party and the dealer. For example, if 
a dealer were to pay a third party or consumer to post positive reviews 
that misrepresent their status as unbiased, independent, or ordinary 
consumer reviews, the dealer would be violating this provision.\224\
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    \224\ See Sec.  463.1 (``It is an unfair or deceptive act or 
practice within the meaning of section 5(a)(1) of the Federal Trade 
Commission Act (15 U.S.C. 45(a)(1)) to violate any applicable 
provision of this part, directly or indirectly . . . .'').
---------------------------------------------------------------------------

    One industry association commenter contended that the Consumer 
Review Fairness Act \225\ already prohibits the conduct covered by this 
provision. The Consumer Review Fairness Act makes it illegal for 
businesses to have form contracts that disallow or restrict consumers 
from posting negative reviews. Section 463.3(k) prohibits 
misrepresentations regarding the authenticity of consumer reviews 
generally. These provisions are not in conflict, and as discussed in 
SBP III.C.1, to the extent the provision creates any duplication, the 
Commission has seen no harm to consumers or competition from 
duplicative prohibitions of deceptive conduct.
---------------------------------------------------------------------------

    \225\ See 15 U.S.C. 45b.
---------------------------------------------------------------------------

    Whether reviews or ratings about a seller or the seller's products 
or services are from unbiased, independent, or ordinary consumers is 
material to consumers' decision-making because a consumer is more 
likely to interact with a particular dealership if the dealership has 
positive reviews or ratings from unbiased, independent, or ordinary 
consumers. Thus, after careful review of all the comments, the 
Commission is finalizing paragraph (k) of Sec.  463.3 without 
substantive modification from the Commission's original proposal.
(l) Whether the Dealer or Any of the Dealer's Personnel or Products or 
Services Is or Was Affiliated With, Endorsed or Approved by, or 
Otherwise Associated With the United States Government or Any Federal, 
State, or Local Government Agency, Unit, or Department, Including the 
United States Department of Defense or Its Military Departments
    Proposed Sec.  463.3(l) prohibited misrepresentations that ``the 
Dealer or any of its personnel or products or services is or was 
affiliated with, endorsed or approved by, or otherwise associated with 
the United States government or any Federal, State, or local government 
agency, unit, or department, including the United States Department of 
Defense or its Military Departments.'' Upon careful review and 
consideration of the comments, the Commission is finalizing paragraph 
(l) of Sec.  463.3 with one technical clarification to replace ``its'' 
with ``the Dealer's.'' The Rule's requirements apply to all individuals 
and entities that meet the definition of ``Dealer.''
    One individual commenter recommended that the Commission 
additionally prohibit dealers from ``causing any person to impersonate 
a police officer for any purpose.'' \226\ The commenter contended that 
such a prohibition would address a common yo-yo financing tactic, 
wherein dealers exert pressure on consumers to return vehicles by 
calling the consumers on the phone, falsely claiming to be police 
officers, and falsely representing that there is a warrant for the 
consumers' arrest or that the dealer has reported the consumers' 
vehicles as stolen. The Commission is likewise concerned about such 
conduct, and notes that it would be covered by the language in this 
paragraph, which applies broadly to misrepresentations of affiliation 
with, endorsement or approval by, or association with ``any Federal, 
State, or local government agency, unit, or department,'' including 
State or local police officials.\227\ By misrepresenting

[[Page 623]]

police involvement in potential vehicle repossession, such conduct 
would also violate paragraph (o) of Sec.  463.3 of the Final Rule.
---------------------------------------------------------------------------

    \226\ Individual commenter, Doc. No. FTC-2022-0046-7445 at 17.
    \227\ The Commission discussed government impersonation scams in 
its Notice of Proposed Rulemaking for a Trade Regulation Rule on 
Impersonation of Government and Business. See 87 FR 62741 (Oct. 17, 
2022). The Commission observed, inter alia, ``ongoing widespread 
fraud schemes in which scammers impersonate law enforcement or 
government officials in attempts to extort money or steal personally 
identifiable information.'' See id. at 62742 (citing announcements 
on March 7, 2022, and May 20, 2022, by the Federal Bureau of 
Investigation and the Social Security Administration's Office of the 
Inspector General, in coordination with other Federal law 
enforcement agencies, respectively).
---------------------------------------------------------------------------

    A number of dealership association commenters contended that some 
States address this type of deception.\228\ As noted in response to 
similar commenter contentions regarding other proposed provisions, the 
Commission has seen no harm to consumers or competition from 
duplicative misrepresentation prohibitions, and overlap between the 
Commission's Rule provisions and existing law is indicative of dealers' 
ability to comply with these provisions. Moreover, including such a 
provision in the Final Rule additionally benefits consumers who 
encounter such conduct, and aids law-abiding dealers that otherwise 
lose business to competitors that act unlawfully. Further, Sec.  463.9 
discusses part 463's relation to State laws.
---------------------------------------------------------------------------

    \228\ One commenter further opined that ``the Department of 
Defense has itself dealt with this situation in the case of military 
lending and sales.'' Comment of Kan. Auto. Dealers Ass'n, Doc. No. 
FTC-2022-0046-4510 at 7.
---------------------------------------------------------------------------

    A dealership association commenter claimed that many dealerships in 
the commenter's State work with military personnel to promote 
charitable causes, and questioned whether a banner listing a dealership 
at a charitable military event would be considered a misrepresentation 
that the dealership is ``associated'' with the military.\229\ Here, the 
Commission notes that a banner that conveys true participation in a 
charitable military event, and does not deceptively represent an 
affiliation with, endorsement or approval by, or association with the 
military, would not violate this provision. The Commission's law 
enforcement practice provides further guidance on this point: the 
Commission's many enforcement actions alleging misrepresentation of 
government affiliation provide examples of the types of conduct that 
would violate this provision.\230\
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    \229\ Comment of N.C. Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-11223 at 9.
    \230\ See, e.g., Complaint ]] 5-6, 9-11, 14, Traffic Jam Events, 
LLC, No. 9395 (F.T.C. Aug. 7, 2020) (alleging auto marketer 
misrepresented that it provided COVID-19 stimulus relief to 
consumers); Complaint ]] 14-26, Fed. Trade Comm'n v. Ponte Invs., 
LLC, No. 1:20-cv-00177 (D.R.I. Apr. 17, 2020) (alleging 
misrepresentation of government affiliation by company that 
impersonated the U.S. Small Business Administration with business 
names ``SBA Loan Program'' and ``SBA Loan Program.com'' and claimed 
to help businesses obtain access to coronavirus relief programs 
administered by the agency); Complaint ]] 24-36, Fed. Trade Comm'n 
v. DOTAuthority.com, Inc., No. 0:16-cv-62186 (S.D. Fla. Sept. 13, 
2016) (alleging defendants misrepresented affiliation with U.S. 
Department of Transportation by claiming to be the ``Compliance 
Unit'' of ``DOTAuthority'' and providing a telephone number with a 
Washington, DC area code).
---------------------------------------------------------------------------

    Representations about whether a seller or any of its personnel, 
products, or services is or was affiliated with, endorsed or approved 
by, or otherwise associated with the government are likely to affect 
consumers' conduct. Consumers are more likely to visit a dealership and 
select a vehicle or product if they believe that a specific dealer or a 
dealer's personnel, products, or services have been approved by a 
government entity. The Commission thus adopts paragraph (l) of Sec.  
463.3 without substantive modification from the Commission's original 
proposal.
(m) Whether Consumers Have Won a Prize or Sweepstakes
    Proposed Sec.  463.3(m) prohibited misrepresentations about whether 
consumers have won a prize or sweepstakes. Upon careful review and 
consideration of the comments, the Commission is finalizing paragraph 
(m) of Sec.  463.3 without modification from its original proposal.
    Comments from dealership associations contended that some States or 
municipalities address this type of deception. As discussed in SBP 
III.C.1, the Commission has not seen harm to consumers or competition 
from multiple prohibitions against misrepresentations. Furthermore, any 
significant overlap between the Commission's Rule provisions and 
existing law is indicative of dealers' ability to comply with these 
provisions. Finally, Sec.  463.9 discusses part 463's relation to State 
laws.
    Misrepresentations about whether consumers have won a prize or 
sweepstakes harm consumers by inducing consumers to choose and transact 
with a particular dealership under false pretenses. Thus, the 
Commission adopts paragraph (m) of Sec.  463.3 without modification 
from the Commission's original proposal.
(n) Whether, or Under What Circumstances, a Vehicle May Be Moved, 
Including Across State Lines or Out of the Country
    Proposed Sec.  463.3(n) prohibited misrepresentations regarding 
whether, or under what circumstances, a vehicle may be moved, including 
across State lines or out of the country. Upon careful review and 
consideration of the comments, the Commission is finalizing paragraph 
(n) of Sec.  463.3 largely as proposed, with the minor modification of 
capitalizing the word ``State,'' as well as the defined term 
``Vehicle'' to conform with the revised definition at Sec.  463.2(e).
    The Commission received comments including from dealership 
associations arguing that proposed Sec.  463.3(n) would pose issues for 
dealers who must comply with limitations imposed by manufacturers or 
distributors on the export of new motor vehicles. These commenters 
requested clarification about liability under this provision in the 
event dealers communicate any such export limitations to consumers or 
take other steps to prevent the export of new vehicles. Section 
463.3(n), however, does not prohibit dealers from accurately and non-
deceptively communicating whether, or under what circumstances, a 
vehicle may be moved--it instead prohibits representations that mislead 
consumers about this information.
    Commenters including a dealership association objected to this 
proposed provision by asserting that a State or insurance company may 
prescribe, and the parties to a contract may agree upon, whether a 
leased or purchased vehicle may be driven to a particular area. This 
provision, however, does not prevent parties from discussing and 
agreeing to whether a vehicle may be moved. Instead, Sec.  463.3(n) 
prohibits misrepresentations about whether, or under what 
circumstances, a vehicle may be moved, including regarding any liens or 
other restrictions that would prevent or hinder consumers' ability to 
move the vehicle beyond certain boundaries. Furthermore, interaction 
with State laws is explained in the section-by-section analysis of 
Sec.  463.9.
    Representations about whether, and under what circumstances, a 
consumer may move a vehicle are material as they are likely to affect a 
reasonable consumer's decision to purchase a vehicle, including 
decisions of military consumers who may frequently need to move.\231\
---------------------------------------------------------------------------

    \231\ See, e.g., Fed. Trade Comm'n, ``The Road Ahead: Selling, 
Financing, & Leasing Motor Vehicles,'' Public Roundtable, Panel 1: 
Military Consumers and the Auto Sales and Financing Process, Remarks 
by Hollister K. ``Holly'' Petraeus, Dir., Off. of Servicemember 
Affs., CFPB, Tr. at 11 (Aug. 2, 2011), https://www.ftc.gov/system/files/documents/public_events/52654/080211_ftc_sess1.pdf 
(``[S]ervicemembers don't always realize if they buy and finance a 
car here in the U.S., they can't take it out of the country unless 
they have a letter of permission from the lienholder to do so. And 
some of the lienholders won't give that permission. . . . [W]e 
[heard from] a JAG in Germany saying, `I see a number of people who 
end up having to do what you would call ``voluntary repossession'' 
on their car because they bought this car, they're excited about it, 
and . . . the person who made them the loan didn't say ``Oh, by the 
way, if you go overseas, we're not gonna let you take it with 
you.''' And . . . sometimes, they'll find that their warranty is no 
good overseas, either.'').

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[[Page 624]]

    Based on a review of the comments and for the reasons previously 
discussed, the Commission is finalizing paragraph (n) of Sec.  463.3 
largely as proposed, with the minor modification of capitalizing 
``State'' and the defined term ``Vehicle.''
(o) Whether, or Under What Circumstances, a Vehicle May Be Repossessed
    Proposed Sec.  463.3(o) prohibited misrepresentations regarding 
whether, or under what circumstances, a vehicle may be repossessed. 
After careful review and consideration of the comments, the Commission 
is finalizing paragraph (o) of Sec.  463.3 with the minor modification 
of capitalizing the defined term ``Vehicle'' to conform with the 
revised definition at Sec.  463.2(e).
    A number of commenters, including consumer advocacy organizations 
and a group of State attorneys general, expressed concern about 
electronic disablement of vehicles, including through the use of 
starter interrupt devices, which are sometimes utilized for vehicle 
repossession. Many of these commenters expressed concern about the 
potential for harm to consumers if such devices are activated without 
regard to the location or operational state of the vehicle, and 
recommended that the Commission restrict their use. Alternatively, one 
such commenter recommended that the Commission add a provision to part 
463 that would require dealers to disclose any such technology, obtain 
the consumer's express, informed consent to its use, and limit its use 
to one time, not to exceed 30 days, once a consumer is in default. 
Finally, the comment from a group of State attorneys general 
recommended that the Commission require additional disclosures any time 
a starter interrupt device is installed, provide advance notice to 
consumers prior to activating such devices, and enable consumers to 
restart their vehicles in emergency or unsafe situations.\232\
---------------------------------------------------------------------------

    \232\ Comment of 18 State Att'ys Gen., Doc. No. FTC-2022-0046-
8062 at 13.
---------------------------------------------------------------------------

    The Commission recognizes the potential for abuse with regard to 
vehicle disablement technology.\233\ It is already illegal under 
section 5 of the FTC Act to engage in deception, including regarding 
vehicle disablement technology, and to unfairly cause substantial 
injury to consumers, such as by disabling a vehicle while it is being 
operated on the highway.\234\ This provision will further provide 
protection for consumers from unfair or deceptive conduct surrounding 
the repossession of vehicles. Moving forward, the Commission will 
continue to monitor the motor vehicle marketplace for developments in 
this area to determine whether additional restrictions are warranted.
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    \233\ See, e.g., Complaint ]] 10-21, CFPB v. USASF Servicing, 
LLC, No. 1:23-cv-03433-VCM (N.D. Ga. Aug. 2, 2023); Consumer Fin. 
Prot. Bureau, ``Supervisory Highlights: Issue 28, Fall 2022'' 6-7 
(Nov. 2022), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-28_2022-11.pdf (finding that, in 
certain instances, auto servicers engaged in unfair acts or 
practices by activating vehicle disabling devices in consumers' 
vehicles when consumers were not past due on payment, contrary to 
relevant contracts and disclosures, including by causing the devices 
to sound late payment warning beeps and by preventing consumers from 
starting their vehicles).
    \234\ See 15 U.S.C. 45; see also, e.g., Int'l Harvester Co., 104 
F.T.C. 949, 1064-67 (1984) (finding that manufacturer's failure to 
adequately disclose that its tractors had a serious safety hazard 
constituted unfair conduct, where the hazard caused serious injury 
to a small number of consumers, consumers could not have reasonably 
avoided the harm because the respondent did not adequately disclose 
the serious risk, and the cost of the respondent disclosing the risk 
was very small in relation to the substantial injury).
---------------------------------------------------------------------------

    A number of dealership association commenters contended that this 
provision would inhibit dealers from making representations about their 
lawful rights to repossess vehicles, positing that, upon making any 
such representations, this provision might require dealers to carry out 
repossessions without exception or risk violating this provision. This 
provision, however, does not prevent dealers from providing accurate 
information to consumers about when a vehicle can, or will, be 
repossessed. Even where dealers have a lawful right to repossess a 
vehicle, current law, as well as this provision, prohibit dealers from 
misrepresenting whether or when they may take such action. Current law, 
including at the Federal level, imposes some such restrictions in this 
regard: for example, the Servicemembers Civil Relief Act prohibits 
repossession of vehicles during a servicemember's period of military 
service without a court order, as long as the servicemember either 
placed a deposit for the vehicle or made at least one installment 
payment on the contract before entering military service.\235\ This 
provision prevents dealers from representing that they may repossess 
military consumers' vehicles under such circumstances. However, dealers 
may still accurately and non-deceptively inform a consumer about the 
circumstances under which a vehicle can be repossessed or when the 
dealer may take action. In providing consumers with such information, 
however, dealers must refrain from representing, including by 
implication, that repossession is likely when in truth it is not.
---------------------------------------------------------------------------

    \235\ See 50 U.S.C. 3952(a).
---------------------------------------------------------------------------

    After considering the comments, the Commission is finalizing 
paragraph (o) of Sec.  463.3 largely as proposed, with the minor 
modification of capitalizing the defined term ``Vehicle.'' This 
provision prohibits dealers from making misrepresentations regarding 
material information about repossession of a vehicle. Information about 
whether, or under what circumstances, a vehicle may be repossessed is 
likely to affect consumers' conduct, including by impacting military 
consumers' conduct regarding which payments to prioritize while serving 
our country.
(p) Any of the Required Disclosures Identified in This Part
    Proposed Sec.  463.3(p) prohibited misrepresentations of any of the 
required disclosures identified in this part. As the Commission noted 
in its NPRM, this was including but not limited to representations that 
limit or contradict the required disclosures.\236\ Upon careful review 
and consideration of the comments, the Commission is finalizing 
paragraph (p) of Sec.  463.3 as proposed.
---------------------------------------------------------------------------

    \236\ NPRM at 42022.
---------------------------------------------------------------------------

    The Commission received a dealership association comment that 
contended generally that the proposed prohibited misrepresentations in 
this provision were already addressed in State statutes and 
regulations, and asserted that such State measures should suffice given 
that, according to the commenter, State regulators are more readily 
available to the public. As discussed in SBP III.C.1, the Commission 
has seen no harm to consumers or competition from duplicative 
prohibitions of deceptive conduct, and commenters did not cite State 
laws that permit misrepresentations or otherwise present a possible 
conflict with the Rule. Moreover, the Final Rule provides additional 
remedies that will benefit consumers who encounter conduct that is 
already illegal under State or Federal law, including by adding a 
mechanism for the Commission to redress consumers injured by a dealer's 
violation of the rule, and will assist law-abiding dealers that 
presently lose business to competitors that act unlawfully. 
Furthermore, State laws

[[Page 625]]

may provide more or less specific requirements, as long as those 
requirements are not inconsistent with part 463, and in the event of an 
inconsistency, the Rule only affects such State law to the extent of 
the inconsistency. Accordingly, the Commission adopts this provision 
without modification from its original proposal.
    The Commission hereby determines it is an unfair or deceptive act 
in violation of the FTC Act for any dealer to make any 
misrepresentations, expressly or by implication, regarding material 
information about the subjects set forth in the paragraphs of Sec.  
463.3. Such misrepresentations are likely to cause consumers to waste 
significant time or money beyond what dealers led them to believe would 
be necessary to purchase or lease a vehicle. Thus, these 
misrepresentations are material and are likely to cause substantial 
injury to consumers. This injury is not reasonably avoidable by 
consumers themselves because information about the truth or falsity of 
the dealer's misrepresentations is within the control of the dealer, 
and there are no countervailing benefits to consumers or to competition 
from the illegal practice of making misrepresentations. Further, these 
provisions also serve to help prevent dealers from failing to make 
disclosures required by Sec.  463.4, and from charging for add-ons that 
provide no benefit and from failing to obtain express, informed consent 
for charges, as required by Sec.  463.5, including by prohibiting 
misrepresentations regarding costs and terms.\237\ To reflect this, and 
without changing any substantive requirements for covered entities, the 
Commission is adding the following sentence to the end of Sec.  463.3, 
at newly designated paragraph (q): ``The requirements in this section 
also are prescribed for the purpose of preventing the unfair or 
deceptive acts or practices defined in this part, including those in 
Sec. Sec.  463.4 and 463.5.'' Thus, this Rule requires dealers to 
refrain from making material misrepresentations about the topics 
enumerated in Sec.  463.3. The prohibitions contained in Sec.  463.3 
help protect consumers from deceptive representations and promote the 
ability of honest dealers to compete on honest terms.
---------------------------------------------------------------------------

    \237\ See 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' such unfair 
or deceptive acts or practices).
---------------------------------------------------------------------------

D. Sec.  463.4: Disclosure Requirements

1. Overview
    The proposed rule included five disclosure requirements for motor 
vehicle dealers regarding certain pricing and financing information (in 
proposed Sec.  463.4(a) through (e)). These provisions proposed to 
require dealers to disclose a vehicle's offering price; an add-on list 
with each optional add-on for which the dealer charges consumers and 
the price of each such add-on; that such add-ons are not required and 
that the consumer can purchase or lease a vehicle without the add-ons; 
and information about a vehicle's total of payments when making certain 
representations about monthly payments.
    In its NPRM, the Commission specifically requested comments 
regarding key aspects of the proposed disclosures. In response, various 
stakeholder groups and individuals provided comments regarding the 
proposed provisions. In this section, the Commission discusses the 
comments, responses to the comments, and any changes made to this 
section based on the comments.
    The Commission received many comments in favor of its proposal, 
including from consumer groups, financial services groups, dealerships 
and dealership employees, individual consumers, and others. These 
comments supported the proposed disclosures as addressing bad actors 
and unlawful practices in the automotive marketplace while promoting 
transparency, reducing consumer confusion, and refraining from 
inhibiting consumer choice or materially increasing the time or 
paperwork required.
    A number of such comments, however, urged the Commission to adopt 
additional disclosures, both in the areas covered by its proposal and 
elsewhere. Regarding disclosures covered in the proposal, for example, 
commenters suggested more detailed requirements, including regarding 
specific disclosure language and specific placement of disclosures. The 
Commission agrees with commenters that key information affecting 
pricing, add-ons, and costs must be disclosed clearly and conspicuously 
to consumers in order to address consumer deception and unauthorized 
charges during the motor vehicle buying and leasing process. To provide 
flexibility for dealers and room for disclosures to be made in a manner 
that is clear and conspicuous to consumers in particular circumstances, 
however, the Commission declines to include additional prescriptive 
language about the form of such disclosures. Further, the Commission 
emphasizes that, in accordance with the provision being finalized at 
Sec.  463.3(p), any material misrepresentations regarding the 
disclosures in the Final Rule violate section 5 of the FTC Act \238\ 
and part 463.
---------------------------------------------------------------------------

    \238\ 15 U.S.C. 45.
---------------------------------------------------------------------------

    The additional disclosures recommended by commenters included, 
inter alia: a disclosure regarding the installation and use of any 
electronic disabling devices; a disclosure explaining the fees certain 
lenders may charge to accept a consumer's loan application; a 
disclosure of the invoice price, or the price a dealer paid the 
manufacturer for the vehicle; a disclosure of any potential value gap 
between a vehicle's price and its appraised value; a disclosure, prior 
to purchase negotiations, of any potential financing limitations 
imposed by the dealer; a disclosure of credit characteristics relied 
upon by the dealer and certain terms; a disclosure that, as with a 
mortgage loan settlement statement, itemizes all the elements of the 
sale for car purchases; \239\ and disclosure signage in dealership 
showrooms or on sales desks explaining that add-ons are not required. 
As for disclosures in additional areas, the Commission recognizes that 
vehicle purchase and lease transactions are lengthy and document-heavy, 
and while consumers may benefit from additional information, each 
additional disclosure requirement could increase the cost to comply 
with part 463 and would risk crowding out the information in the 
Commission's proposed disclosures. Accordingly, the Commission has 
determined not to expand Sec.  463.4 of this Final Rule to include 
additional disclosures.\240\ The Commission will

[[Page 626]]

continue to monitor the marketplace to evaluate the efficacy and 
sufficiency of the present disclosures.
---------------------------------------------------------------------------

    \239\ Comment of Or. Consumer Just., Doc. No. FTC-2022-0046-8492 
at 4; cf. Individual commenter, Doc. No. FTC-2022-0046-0144 
(recommending the disclosed offering price separately list MSRP, 
markup, all fees, and add-on costs); Comment of Legal Aid Just. 
Ctr., Doc. No. FTC-2022-0046-7833 at 2 (``[D]ealers should be 
required to verbally disclose and explain in a language the customer 
understands the material terms of the contact [sic] (including APR, 
total number of monthly payments required, etc.) before customers 
sign[] the contract and receive the customers' consent that they 
understand these terms. After this verbal disclosure, a consent form 
should be required. This form should be provided in the language 
preferred by the customer, and should ensure that the customer was 
provided with accurate and agreed-upon terms prior to signing.''); 
Individual commenter, Doc. No. FTC-2022-0046-1641 (``Mortgage 
lenders are required to give a borrower a disclosure document prior 
to closing to show all costs and expenses; car dealers should have 
to do the same thing.'').
    \240\ In addition to the disclosures noted, a few commenters 
requested additional provisions to address concerns regarding 
transparency in pricing, including related to interest rates, and 
that the Rule require dealers to maintain a fiduciary relationship 
to customers. The Commission recognizes the concerns regarding 
pricing transparency and deceptive conduct related to pricing, and 
will continue to monitor such issues, including after this provision 
(Sec.  463.4(a), offering price disclosure) and the 
misrepresentation provisions (Sec.  463.3) are in effect.
---------------------------------------------------------------------------

    In addition, the Commission received a number of comments 
requesting that it publish forms for the disclosures proposed in this 
section. These comments requested either that the use of such forms be 
required or that the Commission provide a ``safe harbor'' from 
liability under part 463 for dealerships that utilize them.\241\ The 
Commission did not receive, in the course of public comment, evidence 
sufficient to conclude that uniform formatting for the delivery of such 
disclosures would be necessary to make them effective. Nor has the 
Commission received evidence to establish that mandating use of a 
particular form disclosure would obviate deceptive and unfair conduct 
in all circumstances. For example, forms that were required or that 
provided a ``safe harbor'' from liability could be presented (1) with 
other elements that are distracting or confusing, (2) with information 
that modifies or contradicts the form disclosures, (3) with 
instructions, discouragement, or time pressure that causes consumers 
not to review the forms or that makes such review impracticable or 
impossible, or (4) through the use of forms that are pre-completed in 
whole or in part, to the extent this makes the information therein easy 
for consumers to miss. The end result of such an approach would be to 
enable deception while also making such deception more difficult to 
detect. Accordingly, the Commission declines to mandate particular 
disclosure forms as a requirement across all transactions or to shield 
against liability even where dealers otherwise engage in deceptive or 
unfair conduct. The Commission also notes that, because it is not 
mandating particular disclosure forms, dealers that are already 
complying with the law will avoid additional compliance costs 
associated with using a new form, and all dealers will have the 
flexibility to convey the disclosures in a manner that is clear and 
conspicuous under the particular circumstances of their transactions.
---------------------------------------------------------------------------

    \241\ Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8368 at 104, 122; Comment of Ohio Auto. Dealers Ass'n, Doc. No. 
FTC-2022-0046-6657 at 6, 9; see Comment of Compliance Sys., Doc. No. 
FTC-2022-0046-7836 at 1.
---------------------------------------------------------------------------

    The Commission also received comments that expressed opposition to 
this section. Some individual commenters argued that the required 
disclosures were unduly extensive, prescriptive or untested, or that 
the substance of these disclosures is already conveyed to consumers 
before the consummation of the transaction. In response, the Commission 
stresses that this section is limited in both its scope and its 
requirements. Each of the disclosures in Sec.  463.4 is focused on one 
key category of information: vehicle price, add-on optionality, or 
total of payments. This section requires the clear and conspicuous 
disclosure of this information but does not include prescriptive 
requirements. So, for example, a written disclosure would have to be in 
a size that stands out, but a specific font or font size is not 
mandated, nor are the specific terms or format used, nor are any 
particular uses of capitalization, punctuation, ink color, or paper 
color or size. The proposal refrained from additional formal mandates 
in order to provide dealers with flexibility, within the bounds of the 
law, to provide this essential information, including so that dealers 
already conveying this information in a non-deceptive manner may 
continue to do so. Accordingly, the Commission also finds that testing 
of these requirements is unnecessary. Furthermore, each of the 
disclosure requirements being finalized addresses the unfair or 
deceptive act or practice of withholding essential information from 
consumers or presenting such information to them in a deceptive manner. 
After reviewing comments, including those that contended the proposal 
was not prescriptive enough, the Commission concludes that this is the 
correct approach, and as such, has determined not to adopt any 
additional specifications dictating the form or manner in which the 
disclosures must be presented to consumers. Here, as elsewhere, the 
Commission will continue its long track record of working to assist 
with legal compliance.\242\ Further, for dealers already conveying this 
information clearly and conspicuously, complying with this provision 
should not be burdensome.
---------------------------------------------------------------------------

    \242\ Each year since FY2002, the Small Business 
Administration's Office of the National Ombudsman has rated the 
Federal Trade Commission an ``A'' on its small business compliance 
assistance work. See U.S. Small Bus. Admin., ``National Ombudsman's 
Annual Reports to Congress,'' https://www.sba.gov/document/report--
national-ombudsmans-annual-reports-congress (providing reports from 
FY2013-FY2020); Letter from Edith Ramirez, Chairwoman, Fed. Trade 
Comm'n, to Senator David Vitter, Chairman, Comm. on Small Bus. and 
Entrepreneurship at 1 (Nov. 16, 2015), https://www.ftc.gov/system/files/documents/reports/federal-trade-commission-rule-compliance-guides-small-businesses-other-small-entities-commission/eighth_section_212_report_to_congress_july_2014-june_2015.pdf 
(citing Commission's ``A'' rating for ``Compliance Assistance'' by 
the Nat'l Ombudsman from FY2002-FY-2014).
---------------------------------------------------------------------------

    Other commenters, including an industry association, contended that 
these disclosures would have the effect of limiting the products and 
services consumers are offered or otherwise restrict lawful sales 
practices. In response, the Commission reiterates that this section 
focuses on one of the most foundational pieces of information regarding 
the sale of vehicles, add-ons, and financing: their cost. Dealers 
already providing this information in a non-deceptive manner will need 
to make minimal, if any, changes to their disclosure practices. The 
Commission has seen no evidence that disclosing cost information has 
caused dealers to cease offering products.
    Some commenters, including dealership associations, contended that 
the presence of some State standards in this area makes Federal 
regulation unnecessary or contradictory. In response, the Commission 
notes that it drew from several State statutory and regulatory 
provisions in formulating its proposal, and it observes that the 
existence and functioning of such standards demonstrates the 
practicability of such disclosure measures. Dealers can comply with any 
State laws requiring the same conduct as well as this section. 
Similarly, to the extent a State requires additional disclosures 
regarding vehicle price, add-ons, or total of payments, nothing 
prevents dealers from providing those disclosures as well as those 
required under Sec.  463.4 so long as the State disclosures are not 
inconsistent with part 463. To the extent there is truly a conflict 
between this section and State law, Sec.  463.9 provides that part 463 
will govern, but only to the extent of the inconsistency, and only if 
the State statute, regulation, order, or interpretation affords 
consumers less protection than does the corresponding provision of part 
463. Moreover, a number of States do not have existing standards in the 
areas covered by this part; in such States, the Commission's 
disclosures will operate as a key safeguard.
    Other commenters, including an industry association, argued that 
requiring disclosures would increase the time and paperwork for 
consumers to

[[Page 627]]

buy or lease a vehicle. In response, the Commission notes that the 
section includes requirements for the disclosure of salient, material 
information early in the process, thus eliminating the time consumers 
would otherwise spend pursuing misleading offers--time which can then 
be spent pursuing truthful offers in the absence of deception. These 
measures will further allow consumers to compare dealerships in advance 
based on truthful terms; thus, dealerships will earn business based on 
the actual terms offered, and not lose business to dealers who compete 
by omitting or hiding actual terms. Moreover, the disclosures required 
by this section are limited to key information affecting pricing, add-
ons, and total of payments, needed to address consumer deception and 
unauthorized charges during the vehicle-buying and leasing process, and 
are required to be in writing only where the dealer is responding to 
written consumer communications or already providing consumers with 
representations in writing.\243\ As explained in detail in the 
paragraph-by-paragraph analysis of Sec.  463.4(e) in SBP III.D.2(e), in 
order to avoid any additional written disclosure requirements, the 
Commission is declining to mandate that its required disclosures be 
made in writing in every instance.
---------------------------------------------------------------------------

    \243\ See Sec.  463.4(a) (stating that Offering Price must be 
disclosed in writing if the communication with the consumer, or the 
dealer's response, is in writing); Sec.  463.4(c), (d), (e) 
(requiring that disclosures be in writing if the dealer's associated 
representation is in writing).
---------------------------------------------------------------------------

    An industry association commenter argued that the proposed 
disclosure requirements in Sec.  463.4 of the NPRM violate the First 
Amendment. This commenter contended that the proposed disclosures 
constituted compelled speech; that they would be subject to 
intermediate judicial scrutiny were they to be challenged in court; and 
that, in the event of such a challenge, the Commission's actions would 
fail to satisfy that standard of scrutiny, or a less stringent one.
    The Commission first addresses the applicable First Amendment 
standard of review for this rulemaking effort in the event of a 
judicial challenge. If so challenged, the disclosures in Sec.  463.4 
would not be subject to intermediate judicial scrutiny, but instead to 
the less rigorous review standard set forth in Zauderer v. Office of 
Disciplinary Counsel, 471 U.S. 626, 651 (1985). When, as is the case 
here, a regulation ``impose[s] a disclosure requirement rather than an 
affirmative limitation on speech,'' and is ``directed at misleading 
commercial speech,'' Zauderer governs.\244\
---------------------------------------------------------------------------

    \244\ Milavetz, Gallop & Milavetz, P.A. v. United States, 559 
U.S. 229, 249 (2010) (emphasis original).
---------------------------------------------------------------------------

    Under that standard, a commercial speaker's rights ``are adequately 
protected as long as disclosure requirements are reasonably related to 
the State's interest in preventing deception of consumers.'' \245\ In 
Zauderer, the Court upheld a rule requiring attorneys who advertised on 
a contingency-fee basis to disclose that clients who did not prevail in 
litigation might nevertheless be liable for significant costs.\246\ The 
Court found that ``the possibility of deception is [] self-evident'' 
when an advertisement discloses only one type of charge (fees) without 
mentioning another (costs).\247\ In upholding the challenged rule as 
reasonable, the Court emphasized that the rule merely mandated 
disclosure of ``purely factual and uncontroversial information about 
the terms under which . . . services will be available,'' and that the 
``constitutionally protected interest in not providing [such] 
information . . . is minimal.'' \248\
---------------------------------------------------------------------------

    \245\ Zauderer v. Off. of Disciplinary Couns., 471 U.S. 626, 651 
(1985).
    \246\ Id. at 652.
    \247\ Id. at 652-53.
    \248\ Id. at 651.
---------------------------------------------------------------------------

    As in Zauderer, Sec.  463.4 requires only ``purely factual and 
uncontroversial information about the terms under which [commercial 
goods or services] will be available.'' \249\ These material facts 
include the offering price of the motor vehicle; that add-on products 
or services are not required and the consumer can purchase or lease the 
vehicle without the add-on, if true; the total amount the consumer will 
pay to purchase or lease the vehicle and, if that amount assumes the 
consumer will provide consideration, the amount of such consideration; 
and when a lower monthly payment will increase the total amount the 
consumer will pay to purchase or lease the vehicle. As in Zauderer, any 
``constitutionally protected interest'' a motor vehicle dealer might 
have ``in not providing [this] factual information . . . is minimal.'' 
\250\
---------------------------------------------------------------------------

    \249\ See id. at 651.
    \250\ Zauderer v. Off. of Disciplinary Couns., 471 U.S. 626, 651 
(1985) (emphasis original).
---------------------------------------------------------------------------

    Courts applying Zauderer have repeatedly affirmed the 
constitutionality of regulations requiring disclosures of complete 
information about the cost of a purchase, which are similar to the 
required disclosures in Sec.  463.4. For example, courts upheld a 
regulation requiring schools to ``disclose the `total cost' of . . . 
tuition, fees, books, and supplies for its programs,'' finding that 
this information was ``purely factual and uncontroversial.'' \251\ In 
another instance, a court upheld under Zauderer a rule requiring 
airlines to prominently disclose the ``total, final price'' of airfare, 
finding it was ``reasonably related to the government's interest in 
preventing deception of consumers.'' \252\ In yet another case, a court 
upheld a rule requiring hospitals to disclose their rates to consumers, 
finding they were `` `factual and uncontroversial' and directly 
relevant to `the terms under which [hospitals'] services will be 
available' to consumers.'' \253\ The disclosure provisions the 
Commission is finalizing in Sec.  463.4, like the provisions upheld in 
these cases, merely require factual and uncontroversial disclosures to 
provide consumers with accurate and timely pricing and financing 
information as they consider motor vehicle purchases and leases.\254\
---------------------------------------------------------------------------

    \251\ Ass'n of Priv. Sector Colls. & Univs. v. Duncan, 110 F. 
Supp. 3d 176, 199 (D.D.C. 2015), aff'd, 640 F. App'x 5 (D.C. Cir. 
2016).
    \252\ Spirit Airlines, Inc. v. U.S. Dep't of Transp., 687 F.3d 
403, 412-15 (D.C. Cir. 2012) (internal brackets omitted).
    \253\ Am. Hosp. Ass'n v. Azar, 983 F.3d 528, 540 (D.C. Cir. 
2020) (quoting Zauderer v. Off. of Disciplinary Couns., 471 U.S. 
626, 650-651 (1985)).
    \254\ Further, as explained in the paragraph-by-paragraph 
analysis of Sec.  463.4 in SBP III.D.2, the failure to disclose this 
information is itself a deceptive or unfair practice.
---------------------------------------------------------------------------

    As discussed, Zauderer applies here because Sec.  463.4 would 
``impose a disclosure requirement rather than an affirmative limitation 
on speech.'' \255\ The Commission notes, however, that disclosure 
requirements in Sec.  463.4 likewise would pass muster even if, as the 
commenter suggested, they were evaluated under the intermediate 
scrutiny standard formulated in Central Hudson Gas & Electric Corp. v. 
Public Service Commission of New York, 447 U.S. 557 (1980), and 
subsequent cases applying that standard.\256\ As an initial matter, 
Central Hudson applies not to disclosure requirements, such as those 
the commenter challenges, but to affirmative limitations on 
speech.\257\ The Central Hudson test requires restrictions on lawful, 
non-misleading speech to satisfy three remaining criteria. First, there 
must be a substantial governmental interest in the restriction; second, 
the restriction must directly advance that interest; and third, the 
restriction may not be more

[[Page 628]]

extensive than necessary to advance the interest.\258\ Under the 
Central Hudson test, it is not necessary that ``the manner of 
restriction is absolutely the least severe that will achieve the 
desired end.'' \259\ Rather, there merely must be a `` `fit' between 
the [restriction's] ends and the means chosen to accomplish those 
ends--a fit that is not necessarily perfect, but reasonable.'' \260\ In 
other words, the restriction should be ``one whose scope is `in 
proportion to the interest served.' '' \261\
---------------------------------------------------------------------------

    \255\ Milavetz, Gallop & Milavetz, P.A. v. United States, 559 
U.S. 229, 249 (2010).
    \256\ The commenter attributes the intermediate scrutiny test to 
Pagan v. Fruchey, 492 F.3d 766, 771 (6th Cir. 2007), though it was 
in fact formulated by the Supreme Court in Central Hudson.
    \257\ Milavetz, Gallop & Milavetz, P.A. v. United States, 559 
U.S. 229, 249 (2010).
    \258\ See Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of 
N.Y., 447 U.S. 557, 566 (1980). Although the Supreme Court in 
Central Hudson treated the question whether regulated speech is 
truthful and non-misleading as one of four criteria, it has 
alternately treated this question as a threshold inquiry, after 
which the three remaining criteria are evaluated. See Fla. Bar v. 
Went For It, Inc., 515 U.S. 618, 623-24 (1995). Because the 
government is ``free to prevent the dissemination of commercial 
speech that is false, deceptive, or misleading,'' Zauderer v. Off. 
of Disciplinary Couns., 471 U.S. 626, 638 (1985), if a challenged 
restriction fails this threshold inquiry, Central Hudson does not 
apply.
    \259\ Bd. of Trs. of State Univ. of N.Y. v. Fox, 492 U.S. 469, 
480 (1989).
    \260\ Id. (citation omitted).
    \261\ Id. (quoting In re R.M.J., 455 U.S. 191, 203 (1982)).
---------------------------------------------------------------------------

    The disclosure provisions the Commission is finalizing in Sec.  
463.4 satisfy these criteria. First, the disclosure provisions serve a 
substantial governmental interest by requiring motor vehicle dealers to 
provide accurate terms, and in particular, accurate pricing 
information, in advertising and sales discussions.\262\ As the Supreme 
Court has made clear, the government's ``interest in ensuring the 
accuracy of commercial information in the marketplace is substantial.'' 
\263\ And as explained in the paragraph-by-paragraph analysis of Sec.  
463.4 in SBP III.D.2, the disclosure requirements set forth there are 
aimed at ensuring that consumers receive accurate pricing information 
and other material transaction terms, and that dealers refrain from the 
unfair or deceptive act or practice of failing to provide this 
information.\264\ The required disclosures directly advance, ``fit'' 
reasonably with, and are proportionate to, their intended ends of 
prohibiting and preventing unfair or deceptive conduct in motor vehicle 
transactions. They prevent dealers from luring consumers to dealerships 
with unfair or deceptive advertising tactics, from padding prices with 
unwanted add-on products or services, and from misdirecting consumers 
about the true cost of a vehicle through discussions of monthly payment 
amounts. The disclosure requirements effectively ``impose[] no burden 
on speech other than requiring [motor vehicle dealers] to disclose the 
total price consumers will have to pay. This the First Amendment 
plainly permits.'' \265\
---------------------------------------------------------------------------

    \262\ NPRM at 42012.
    \263\ Edenfield v. Fane, 507 U.S. 761, 769 (1993).
    \264\ Nothing could be more directly relevant to accurate 
pricing than disclosure of the actual price itself. See Spirit 
Airlines, Inc. v. U.S. Dep't of Transp., 687 F.3d 403, 415 (D.C. 
Cir. 2012) (substantial governmental interest ``is clearly and 
directly advanced by a regulation requiring that the total, final 
price be'' prominently disclosed).
    \265\ Id. Further, the Commission has taken into account prior 
enforcement work and other initiatives. See NPRM at 42022-25 
(explaining rationale behind disclosure requirements and extensively 
citing prior enforcement experience and record evidence); see also 
Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 555 (2001) (``We do 
not . . . require that empirical data come accompanied by a surfeit 
of background information. We have permitted litigants to justify 
speech restrictions by reference to studies and anecdotes . . . or 
even . . . based solely on history, consensus, and simple common 
sense.'' (internal quotation marks and alterations omitted)); Fla. 
Bar v. Went For It, Inc., 515 U.S. 618, 628, (1995) (same); Burson 
v. Freeman, 504 U.S. 191, 211 (1992) (finding speech restrictions 
justified even under strict scrutiny based on a ``long history, a 
substantial consensus, and simple common sense''); Milavetz, Gallop 
& Milavetz, P.A. v. United States, 559 U.S. 229, 251 (2010) (``When 
the possibility of deception is as self-evident as it is in this 
case, we need not require the State to conduct a survey of the 
public before it may determine that the advertisement had a tendency 
to mislead.'' (internal quotation marks and alterations omitted)); 
Am. Hosp. Ass'n v. Azar, 983 F.3d 528, 540 (D.C. Cir. 2020) (finding 
reasonable relationship between rule and governmental interests 
where ``the Secretary, relying on complaints from consumers, studies 
of state initiatives, and analysis of industry practices, reasonably 
concluded that the rule's disclosure scheme will help the vast 
majority of consumers'').
---------------------------------------------------------------------------

    After careful consideration of the comments, the Commission has 
determined to finalize the introductory paragraph of Sec.  463.4 and 
certain of the disclosure requirements included in its NPRM, with some 
minor textual changes. The introductory paragraph of the NPRM proposed 
that it would be ``a violation of this part and an unfair or deceptive 
act or practice in violation of section 5 of FTC Act for any Motor 
Vehicle Dealer to fail to make any disclosure required by this section, 
Clearly and Conspicuously.'' The Commission is finalizing this 
paragraph with the minor textual change of substituting ``Federal Trade 
Commission Act'' for ``FTC Act'' for clarity and conformity with other 
parts of the Rule. The Commission is also adding the word ``Covered'' 
to the defined term ``Covered Motor Vehicle Dealer'' to conform with 
the revised definition at Sec.  463.2(f), discussed in SBP III.B.2(f).
    The Commission is finalizing the specific disclosure requirements 
proposed at Sec.  463.4(a), (c), (d), and (e), with modifications noted 
in the paragraph-by-paragraph analysis in SBP III.D.2(a), III.D.2(c), 
III.D.2(d), and III.D.2(e).
    In the paragraphs that follow, the Commission discusses the 
disclosure requirements proposed in the NPRM, the comments relating to 
the specific disclosures, responses to the comments, and the disclosure 
requirements adopted in Sec.  463.4.
2. Paragraph-by-Paragraph Analysis of Sec.  463.4
(a) Offering Price
    The offering price disclosure provision in proposed Sec.  463.4(a) 
required dealers to disclose a vehicle's offering price in 
advertisements that reference a specific vehicle or represent a 
monetary amount or financing term for any vehicle, as well as upon 
receipt of a consumer communication about a specific vehicle or any 
monetary amount or financing term for any vehicle. The Commission 
proposed defining ``Offering Price,'' in Sec.  463.2(k), as ``the full 
cash price for which a Dealer will sell or finance the motor vehicle to 
any consumer, excluding only required Government Charges.'' The 
Commission also proposed defining the term ``Government Charges,'' then 
in Sec.  463.2(h), to mean ``all fees or charges imposed by a Federal, 
State or local government agency, unit, or department, including taxes, 
license and registration costs, inspection or certification costs, and 
any other such fees or charges.'' For the reasons discussed in the 
following paragraphs, the Commission is finalizing the offering price 
disclosure provision at Sec.  463.4(a), as well as the corresponding 
``Offering Price'' and ``Government Charges'' definitions in Sec.  
463.2 (finalized at Sec.  463.2(k) and (i), respectively), largely as 
proposed. The Commission is including a modification to the offering 
price definition to clarify that dealers may, but need not, exclude 
required government charges from a motor vehicle's offering price, and 
is substituting ``Vehicle'' for ``motor vehicle'' to conform with the 
revised definition at Sec.  463.2(e), discussed in SBP III.B.2(e). 
Additionally, the Commission is including a typographical modification 
to the ``Government Charges'' definition to include a serial comma for 
consistency. The Commission also is capitalizing the defined terms 
``Vehicle'' throughout, in its singular, plural, and possessive forms, 
and is adding language to the end of Sec.  463.4(a)(3)(ii) clarifying 
that the requirements in Sec.  463.4(a) ``also are prescribed for the 
purpose of preventing the unfair or deceptive acts or practices defined 
in this part, including those in Sec. Sec.  463.3(a) and (b) and 
463.5(c).''
    The Commission received a significant number of comments on its

[[Page 629]]

proposed offering price disclosures. Many commenters supported the 
Commission's proposal to require dealers to provide uniform, 
comprehensive, and accurate pricing information. These commenters 
noted, inter alia, that despite laws generally prohibiting unfair or 
deceptive acts or practices, present market conditions fail to balance 
the ``playing field'' of information between consumers and motor 
vehicle dealers, allowing dealers to take advantage of consumers by 
hiding information about pricing, imposing surprise price increases, or 
using pricing advertising tactics that systematically deceive 
consumers.\266\ Many consumers also underscored the need for the 
proposed disclosure requirements. Commenters in support noted, for 
instance:
---------------------------------------------------------------------------

    \266\ See, e.g., Comment of Nat'l Consumer L. Ctr. et al., Doc. 
No. FTC-2022-0046-7607 at 17-20.
---------------------------------------------------------------------------

    <bullet> Buying a car has always been a horrible experience for me. 
The endless driving to dealerships who advertise vehicles for a sale 
price only to find that the vehicle does not exist, or the price 
advertised for the specific vehicle is not what they had posted. The 
salespersons['] tactics, always attempting to put you in a vehicle 
based on a car payment, along with dancing around the simple question 
of the actual out the door price of the vehicle. . . . It is such a 
shame that the dealerships just do not give the customer the price of 
the vehicle without them wanting to start a ``folder'' and take all of 
your information, a copy of your drivers license, ect [sic] . . . . 
Please regulate the automobile dealerships, especially now when it 
seems they are at their worst with these ridiculous add on fees (paint 
and upholstery protector, ect [sic] which was not added at the 
manufacturer) along with adjustments on top of the MSRP.\267\
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    \267\ Individual commenter, Doc. No. FTC-2022-0046-6649.
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    <bullet> Buying a car in the US is now akin to what I used to do in 
the Army: Before going into the dealership, I have to spend hours 
conducting ``intelligence prep of the battlefield'' to understand the 
tactics the dealership's sales and finance & incentives staff will 
throw at me. . . . It has been made increasingly worse by dealerships 
that advertise a false price to entice a buyer but ``bait-and-switch'' 
with Additional Dealer Mark-Ups (ADM), and bogus fees and charges for 
supposedly dealer-installed items tha[t] the consumer doesn't want in 
the first place. . . . Unless the FTC passes this proposed rule, things 
will get worse before they get better.\268\
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    \268\ Individual commenter, Doc. No. FTC-2022-0046-6225.
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    <bullet> Though I am not usually a fan of adding layers of 
governmental regulations to what should be a simple transaction, there 
definitely needs to be a change in what is allowed in the car buying 
process. . . . As consumers we should not have to spend hours reading 
tiny print in obscure sections of a website in order to validate a 
posted price. The price should not be elevated at the last minute in a 
hidden line item such as a mandatory detailing package or service plan 
you do not want or need to the tune of thousands of dollars. . . . We 
should not have to spend hours at a dealer and go through mounds of 
paperwork with a fine tooth comb in order to simply see the ACTUAL 
price of the vehicle. It is a ridiculous ploy to confuse people into 
purchasing things they do not want or need.\269\
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    \269\ Individual commenter, Doc. No. FTC-2022-0046-6089.
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    <bullet> I have been trying to buy a new car for the last two years 
but with unexpected costs I am not able to have a clear written 
contract on the car and its pricing. I have contacted several dealers 
in my area and many of them have issues that prevent me from commited 
[sic] to buying from them. This ranges from them not being able to give 
me a written sheet of the cost of the car, fees, ect [sic] showing me 
how much I will be paying in the end. . . . Most of the dealerships I 
spoke to would not give me a sales sheet of the vehicle I want to 
purchase to show me how much I will be paying in total. I would have to 
put a down payment and just trust them over the phone. If I can't get 
it in writing it is hard to commit to a down payment I could lose.\270\
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    \270\ Individual commenter, Doc. No. FTC-2022-0046-6656.
---------------------------------------------------------------------------

    <bullet> Vehicles are typically the second largest purchase made by 
people. Given the choices available according to respective needs/
wants, purchasing a vehicle should be the same as going to any other 
mass-market retailer and picking that appliance with a set price. So 
why do we need to haggle or expend additional intellectual and 
emotional bandwidth towards ensuring that the transaction is as 
initially stated? There are instances where I'd rather be back 
conducting combat operations in Iraq than go through the dealer 
process, as it incenses me that this corrupt way of doing business is 
given a free pass. . . . If you are a reputable and honest dealership, 
then there should be no worry; it will be business as usual.\271\
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    \271\ Individual commenter, Doc. No. FTC-2022-0046-5238.
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    <bullet> Think of us, the car buying public. We are mad as hell. 
Please start fixing this crooked business model where nobody even knows 
what they are supposed to be paying.\272\
---------------------------------------------------------------------------

    \272\ Individual commenter, Doc. No. FTC-2022-0046-5227.
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    <bullet> As a consumer, I fully support this new proposed rules 
update. The dealership experience has been an anxiety provoking event 
everytime [sic] I attempt to purchase a car. I have multiple friends 
and family that all report shady practices, bait and switch, and up 
charging at point of sale during their car buying process. Please pass 
these regulations! \273\
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    \273\ Individual commenter, Doc. No. FTC-2022-0046-5228.
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    <bullet> I am writing in FULL support of the FTC rules and 
regulations. . . . Buyers deserve to know Out the door prices and not 
be hassled by nonsensical add-ons for the dealership's benefit. People 
should feel comfortable and excited to buy their 1st car rather than 
the dread I feel.\274\
---------------------------------------------------------------------------

    \274\ Individual commenter, Doc. No. FTC-2022-0046-5219.
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    <bullet> We find the vehicle we came to see and see a sticker 
beside the manufacture[r] one with added prices. These typically 
include car alarms, VIN etching, protection packages, floor mats, 
market adjustment, etc. We go to purchase the vehicle now and they say 
that none of these can be removed from the price of the car (even 
though they advertised them without them at a much lower price). We 
attempt to negotiate them off and find out their [sic] is an additional 
addon like reconditioning fee. We fail at getting the price of the 
vehicle down to the advertised price and leave.\275\
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    \275\ Individual commenter, Doc. No. FTC-2022-0046-0900.
---------------------------------------------------------------------------

    <bullet> I have financed all of my cars, and the total cost for the 
vehicle has always been hidden, either physically or through the dealer 
trying to move focus onto other numbers such as the monthly payment. 
Since monthly payments will vary due to credit history, down payments, 
interest rates, taxes, and more, it is not an effective tool for 
measuring a deal. $300 a month could be a great deal on one car, and a 
horrible deal on another. I would greatly benefit from the proposal[']s 
provision to clearly list and advertise the price of the car without 
additional add[-]ons. It would greatly reduce the work of finding the 
right car at the right dealership. In each of the 3 cases, I have gone 
to multiple dealers, wanting to purchase a specific vehicle on their 
lot, and walked away because of the hidden

[[Page 630]]

costs being added to the price of the car.\276\
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    \276\ Individual commenter, Doc. No. FTC-2022-0046-6490.
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    <bullet> I work as a salesperson at a local Nissan dealership. . . 
. Currently, dealerships across the US, including the one I work for, 
have made the car buying process needlessly confusing, expensive, and 
frustrating by engaging in false advertising and hidden add-on 
products. While these practices are very unscrupulous, they are 
incredibly effective at what they are designed to do: drive revenue for 
the store. If these regulations are passed, they would certainly take a 
significant toll on my personal finances. But the longer I work in my 
position, the more I realize that no one should be allowed to engage in 
such exploitative conduct in the course of running a business. . . . 
Good, ethical dealers will not have to make any changes if these rules 
are put into place. I also happen to know that several of the comments 
in opposition to the proposed regulations are solicited by dealerships 
and their management. The dealership group I work for, for example, 
sent out a company-wide email encouraging employees to post comments on 
this site in opposition to these rules. But there's no question: The 
American people want these regulations. They need these regulations. 
The only ones that don't want them are crooked auto dealerships across 
the US. It's been far too long that such dealerships have run amuck 
with underhanded sales practices and deception. I would urge the FTC to 
stand strong against . . . dealership groups[]or any lobbyists and get 
these rules passed! I know there will be stiff resistance but it's of 
the utmost importance to good dealerships, transparent salespeople, 
and, most importantly, the average American consumer! \277\
---------------------------------------------------------------------------

    \277\ Individual commenter, Doc. No. FTC-2022-0046-3693.
---------------------------------------------------------------------------

    A number of commenters supported the offering price disclosure 
requirement and associated definitions; some expressed support while 
urging additional protections. A number of commenters, including 
consumer advocacy organizations as well as individual commenters, 
requested that the Commission require a vehicle's offering price to 
include additional items, such as charges for add-ons attached to the 
vehicle when it is offered, and charges for add-ons required by the 
dealer to be sold with the vehicle; to exclude rebate information, 
including rebates contingent upon the use of a certain financing 
company or upon qualifying for any other rebate; and to prohibit the 
exclusion of certain charges, including the advertisement of an 
offering price that factors out a down payment amount.\278\
---------------------------------------------------------------------------

    \278\ A number of these commenters further requested that the 
term ``Offering Price'' include additional dealer fees that are 
known to the dealer at the time they are advertised and imposed by 
the dealer rather than a government entity. These requests are 
addressed in the discussion of the Commission's definition of 
``Government Charges'' in SBP III.B.2(i).
---------------------------------------------------------------------------

    To begin, the Commission notes that by the terms of the proposed 
``Offering Price'' definition, the only charges a dealer was permitted 
to exclude from a vehicle's offering price were required government 
charges. Thus, under the proposal, if a dealer were to charge any 
consumer for a preinstalled add-on, or require any consumer to pay for 
an add-on to purchase or finance the vehicle, then the charges for such 
add-ons would be required to be included in the vehicle's offering 
price.\279\ In addition, while the proposed provision did not prevent 
dealers from presenting consumers with accurate and non-misleading 
additional information, including terms of limited availability, the 
required offering price disclosure needed to remain clearly and 
conspicuously presented to consumers, and could not be based on 
discounts or rebates that are not available to ``any consumer,'' 
including rebates contingent upon the use of a certain financing 
company or upon qualifying for any other rebate. Similarly, under the 
proposal, if the dealer required a down payment amount to sell or 
finance the vehicle, the offering price could not factor out such an 
amount.
---------------------------------------------------------------------------

    \279\ If a dealer does not require any consumer to pay for an 
add-on, current law, as well as provisions in this Rule, require 
dealers to refrain from deception in this regard. See, e.g., Sec.  
463.3(a), (b) (prohibiting material misrepresentations regarding the 
costs or terms of purchasing, financing, or leasing a vehicle, as 
well as any costs, limitation, benefit, or any other material aspect 
of add-ons); Sec.  463.4(c) (requiring disclosures regarding 
optional add-ons).
---------------------------------------------------------------------------

    With respect to the proposed definition of ``Government Charges,'' 
which is used in the definition of ``Offering Price,'' a number of 
consumer advocacy organization commenters contended the definition 
should be narrow to accomplish the Commission's goal of ensuring that 
consumers have access to accurate pricing information before they enter 
a dealership, emphasizing that only charges that are imposed by, and 
payable to, a government entity should be permitted to be excluded from 
a vehicle's offering price, and that document fees that some States 
allow dealers to charge should not be excluded from the offering price. 
The Commission notes that, as proposed, the term ``Government Charges'' 
is limited to those charges ``imposed by a Federal, State or local 
government agency, unit, or department.'' The Commission specified in 
this proposed definition that such charges need be ``imposed by'' a 
government entity rather than, for instance, having merely been 
``authorized by'' or ``allowed by'' such an entity. This language does 
not reach charges that are authorized by a government entity but not 
required, since such charges have not been ``imposed'' \280\ by the 
government. This distinction therefore excludes from the definition of 
``Government Charges'' fees, such as dealership document preparation 
fees that State or local law does not require consumers to pay. 
Furthermore, the definition of ``Offering Price'' at Sec.  463.2(k) 
permits only ``required'' government charges to be excluded from a 
vehicle's offering price. Thus, charges the government does not require 
consumers to pay, but allows the dealer to charge or to pass along to 
the consumer, such as document fees, must be included in the disclosed 
offering price if the dealer requires such charges of any consumer.
---------------------------------------------------------------------------

    \280\ See, e.g., Impose, Cambridge Advanced Learner's Dictionary 
& Thesaurus, https://dictionary.cambridge.org/us/dictionary/english/impose (``to officially force a rule, tax, punishment, etc. to be 
obeyed or received'').
---------------------------------------------------------------------------

    Relatedly, an individual commenter suggested that the Commission 
delete the phrase ``inspection or certification costs'' from the 
definition of ``Government Charges'' in order to avoid confusion about 
the status of inspection or certification charges that ``are NOT 
imposed by the Government,'' as well as explicitly state in the 
definition that the term does ``not include dealer document or document 
processing fees (``doc fees''), or electronic titling and registration 
fees, which are not imposed by the Government.'' \281\ Regarding the 
phrase ``inspection or certification costs,'' such costs that are not 
``imposed'' by the government are excluded from the definition of 
``Government Charges,'' as the plain language makes clear. Similarly, 
as noted, dealer document or document processing fees and any other 
fees that are not imposed by the government are excluded from the 
definition, as the plain language states.
---------------------------------------------------------------------------

    \281\ Individual commenter, Doc. No. FTC-2022-0046-7445 at 15-
16.
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    Some commenters, including a group of State attorneys general, 
likewise recommended that a vehicle's offering price include 
``anticipated'' or

[[Page 631]]

``estimated'' government charges.\282\ The Commission agrees that 
consumers would benefit from knowing this information early on in their 
shopping experience, and notes that dealers are permitted under this 
Final Rule to provide additional, truthful information along with a 
vehicle's offering price. Rather than requiring that anticipated 
government charges be included in the offering price, the Commission is 
modifying the definition from its original proposal to make clear that 
dealers need not exclude any such charges from the offering price. The 
Commission will evaluate whether the definition, as finalized, as well 
as its associated disclosure, effectively address deceptive and unfair 
market conduct, and will consider future modifications as market 
practices evolve.
---------------------------------------------------------------------------

    \282\ See, e.g., Comment of 18 State Att'ys Gen., Doc. No. FTC-
2022-0046-8062 at 7; Comment of Consumer Att'ys & Advocs., Doc. No. 
FTC-2022-0046-7695 at 2-3 (requesting that the vehicle's offering 
price include ``an estimate of government fees and charges such as 
sales tax and registration based on the dealer's location'').
---------------------------------------------------------------------------

    Thus, the Commission is finalizing a definition of ``Offering 
Price'' that clarifies that dealers may, but need not, exclude required 
government charges from a vehicle's offering price that meets the 
requirements of Sec.  463.2(k). In particular, the Commission is 
finalizing a definition of ``Offering Price'' that removes the phrase 
``excluding only'' and adds the phrase ``provided that the Dealer may 
exclude only'' in its place. The definition also substitutes 
``Vehicle'' for ``motor vehicle'' to conform with the revised 
definition of ```Covered Motor Vehicle' or `Vehicle''' at Sec.  
463.2(e), such that the definition reads as follows: ``Offering Price 
means the full cash price for which a Dealer will sell or finance the 
Vehicle to any consumer, provided that the Dealer may exclude only 
required Government Charges.''
    Other commenters, including consumer advocacy organizations, 
proposed additional requirements to the disclosure at Sec.  463.4(a): 
prescribing formatting, posting, and presentation requirements for 
offering price information, such as attaching a written offering price 
to each vehicle, providing written offering price information in 
response to consumer communications regardless of whether the 
communications are written, and requiring offering price to be the most 
conspicuous piece of information displayed to consumers. Regarding the 
manner in which the offering price must be presented, the Commission 
proposed that all disclosures under Sec.  463.4, including the offering 
price disclosure, be presented clearly and conspicuously. As previously 
discussed, the proposed disclosure provisions were directed at 
addressing unlawful conduct while providing dealers with flexibility to 
present such disclosures in a manner that is clear and conspicuous to 
their consumers under the particular circumstances. Thus, the 
Commission has determined not to adopt further formatting, posting, or 
presentation requirements for its offering price disclosure.
    Some commenters, including consumer advocacy organizations and a 
consumer protection agency, proposed that the Commission adopt an 
additional requirement providing that dealers must accept an offer from 
a buyer of the offering price. In response, the Commission notes that, 
under its proposal, if a dealer were requiring any consumer to pay a 
price that was higher than the disclosed offering price, or adding 
other conditions--such as requiring the use of a particular finance 
company or the purchase of an add-on--to obtain the vehicle at the 
offering price, such practices would violate part 463, including the 
offering price provision, which requires disclosure of the full cash 
price for which the dealer will sell or finance the vehicle to any 
consumer,\283\ and the related requirement the Commission is finalizing 
under Sec.  463.3(p), which prohibits misrepresentations regarding the 
required disclosures in part 463.\284\
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    \283\ See Sec.  463.2(k) (defining ``Offering Price'' as ``the 
full cash price for which a Dealer will sell or finance the Vehicle 
to any consumer, provided that the Dealer may exclude only required 
Government Charges'').
    \284\ Some commenters described situations in which a dealer may 
decline to sell or finance a vehicle to a particular consumer, 
including due to legal requirements, irrespective of whether the 
dealer otherwise intends to honor its offering price disclosures. 
These situations include, for example, a consumer who presented 
identity theft indicia under the Commission's Red Flags Rule, 16 CFR 
681; a consumer on the Specially Designated Nationals List 
maintained by the Office of Foreign Assets Control; a consumer who 
cannot produce the required proof of insurance or license to 
complete the transaction; or a consumer who is abusive or violent at 
the dealership. The Commission's offering price provision is a 
pricing disclosure; it will not otherwise alter the status quo on 
whether a given sale or financing transaction must be consummated.
---------------------------------------------------------------------------

    An individual commenter proposed that the Commission adopt 
additional requirements requiring dealers to itemize and disclose each 
sub-component of the offering price, including any applicable document 
fee. The Commission notes that it has not been presented with any 
evidence that the benefits of such additional disclosure requirements 
outweigh the costs to consumers and competition. The Commission may 
consider additional such restrictions or additional guidance in the 
future, based on stakeholder experience with part 463 and whether it 
effectively remediates unlawful conduct.
    Other individual commenters proposed that the Commission impose 
limitations on the price of the vehicle--for example, prohibiting 
dealers from charging more than MSRP for the vehicle--or prohibit or 
limit particular charges, such as dealer fees, document fees, and 
destination charges. The Commission notes that several Rule provisions 
will prohibit hidden charges and deception related to pricing, 
including Sec.  463.4(a) (offering price disclosure) and Sec.  463.3(a) 
(prohibition against misrepresenting the costs or terms of purchasing, 
financing, or leasing a vehicle). Before including additional 
provisions, the Commission will continue studying the market, including 
after the Rule is in effect, to determine whether additional steps are 
needed.
    Other commenters opposed the offering price disclosure and related 
definitions. Commenters including an industry association contended 
that, by defining ``Offering Price'' in Sec.  463.2(k) as the price 
``for which a Dealer will sell or finance the motor vehicle to any 
consumer,'' the Commission would prohibit dealers from changing vehicle 
prices as market conditions change, thereby making vehicle pricing less 
dynamic than under current industry practice.
    Section 463.4 and the offering price definition in Sec.  463.2(k), 
however, do not alter the current status quo on pricing accuracy or 
pricing changes. Consistent with the law, the offering price--as with a 
presently advertised price--must be truthful and non-misleading. If the 
offering price is only available for a certain period of time, the 
advertisement must convey that fact clearly and conspicuously, and if 
it is no longer available, the dealer must cease advertising the 
offering price.\285\
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    \285\ As is the case under current law, under part 463, any 
qualifying information necessary to prevent deception regarding a 
material fact must be conveyed clearly and conspicuously. See FTC 
Policy Statement on Deception, supra note 42, at 1 n.4, 4.
---------------------------------------------------------------------------

    Some commenters expressed a related concern that the Commission's 
offering price disclosure requirement could require dealers to change 
their practices when an advertised vehicle is no longer available. For 
example, one industry commenter asked whether, under such 
circumstances, a dealer would somehow be obligated to sell some other 
vehicle

[[Page 632]]

to that consumer at the offering price. Here, the offering price 
disclosure requirement does not alter the status quo: Under Sec.  
463.4(a), as under current law, if an offer is limited to a particular 
period of time, the offer must convey that fact, and once a price is no 
longer available, the dealer must cease advertising that price. 
Regarding which vehicles to sell at an advertised offering price, under 
the Commission's proposal, the dealer must disclose the offering price 
for the vehicles advertised. If the dealer charges a different price, 
then the dealer has not disclosed the offering price for which the 
dealer will sell or finance the vehicle, and the dealer has 
misrepresented the price of the vehicle, in violation of several 
provisions, including Sec. Sec.  463.3(b) and (p) and 463.4(a). For 
example, if a dealer conveys that all vehicles of a certain nature or 
in a certain category are available at a particular offering price, but 
charges a higher offering price for any vehicle of that nature or in 
that category, the dealer has violated the Rule.
    Other comments, including from a member of Congress and from 
dealership associations, raised concerns that the Commission's proposal 
would limit dealers from advertising rebates, discounts, or incentives 
of limited availability, including when qualifications for such 
rebates, discounts, or incentives are identified in the advertising, 
further contending that such a result would contradict prior FTC 
practice. Relatedly, commenters including an industry association 
questioned whether the Commission's proposal prohibited dealers from 
advertising additional vehicle prices, contending that such a result 
would conflict with the longstanding obligation under Federal law to 
disclose a vehicle's Manufacturer's Suggested Retail Price, or MSRP. 
The Commission notes, however, that the offering price disclosure 
requirement does not prevent dealers from presenting accurate and non-
misleading additional information, including terms of limited 
availability, so long as the required offering price disclosure remains 
clearly and conspicuously presented to consumers.\286\ If, however, a 
dealer's disclosure were to give consumers a net pricing impression 
that is contrary to that which is actually available, then the 
disclosure would violate Sec.  463.4(a), and the related requirement 
under Sec.  463.3(p).\287\
---------------------------------------------------------------------------

    \286\ A number of dealership associations expressed a related 
concern that the Commission, through its offering price proposal, 
was somehow seeking to restrict competition between dealers to being 
only about the price of vehicles. The associations described other 
areas, beyond vehicle price, by which dealerships currently 
distinguish themselves (e.g., their range of products and services; 
their service availability; the convenience of their locations; and 
the nature of their sales staffing and process). In response, the 
Commission notes that it has long recognized the importance of 
protecting competition across both price and quality metrics, 
including providing consumers with truthful, nondeceptive 
advertising. See, e.g., Cal. Dental Ass'n v. Fed. Trade Comm'n, 526 
U.S. 756, 766-68 (1999) (affirming Commission exercise of law 
enforcement authority against industry guidelines that unlawfully 
restricted both price advertising and advertising relating to the 
quality of dental services). As noted, the offering price disclosure 
requirement does not prevent dealers from presenting accurate and 
non-misleading additional information, including information about 
any such distinguishing characteristics, so long as the offering 
price is presented clearly and conspicuously.
    \287\ For reference, Sec.  463.3(p), which the Commission is 
finalizing, see SBP III.C.2(p), prohibits dealers from making 
material misrepresentations regarding ``[a]ny of the required 
disclosures'' under the Final Rule.
---------------------------------------------------------------------------

    Some commenters, including dealership associations, generally 
concluded the Commission's proposed offering price definition, or its 
associated disclosure provision, were unnecessary, confusing, 
burdensome, or likely to hinder comparison shopping. Some commenters, 
for instance, contended that their respective States already prohibit 
misrepresenting price terms, rendering the Commission's proposal 
redundant. The Commission notes, however, that a simple disclosure of 
the offering price, using the same definition across States, addresses 
multiple issues, including: the promotion of prices based on dealer 
discounts, rebates, or other price reductions when such benefits are in 
fact subject to hidden or undisclosed restrictions that render them 
unavailable to typical customers; the concealment or omission of 
additional dealer charges, such as for document preparation fees, 
amounting to several hundred dollars; the advertisement of a price 
without disclosing material limitations or additional charges required 
by the dealer that are fixed and thus can be readily included in the 
price at the outset; and the inducement to pursue pricing offers that 
are not actually available or to pay more for a vehicle due to 
inadequate or nonexistent disclosures. Moreover, this disclosure and 
the associated definitions should produce the corollary benefit of 
increasing price competition among dealers, who will be able to compete 
on truthful, standard terms.\288\ The Commission also concludes that 
the claim that its offering price disclosure requirement would limit 
comparison shopping appears to follow from the mistaken notion that the 
offering price disclosure prohibits dealerships from conveying accurate 
additional information to consumers, including information about 
rebates, discounts, or other limited-availability incentives.
---------------------------------------------------------------------------

    \288\ See NPRM at 42023.
---------------------------------------------------------------------------

    Relatedly, some dealership association commenters contended there 
are areas of overlap, or potential conflict, with State law. Pursuant 
to Sec.  463.9 of part 463, where it is possible for dealers to comply 
with both State law and the provisions of this regulation, or where 
State law affords greater consumer protection, part 463 will not 
displace existing State pricing or disclosure regimes. This addresses 
many of the commenters' concerns about State law. Some dealership 
associations, for instance, contend that their respective States 
require dealers to separately disclose a dealer document fee and not 
represent that the fee is required by the State, or that they allow 
dealers, with certain limitations, to incorporate rebates into an 
advertised price. Regarding document fees, dealers can simultaneously 
comply with part 463, which requires document fees to be included in 
the offering price unless they are ``required'' government charges, and 
with State law that permits but does not require document fees to be 
excluded from a vehicle's advertised price, or that requires disclosure 
of the amount of the document fee and that such a fee is not required 
by the State, by disclosing the offering price and any additional 
State-required information, such as the amount of the dealer document 
fee. Similarly, regarding rebates, in addition to the offering price, 
dealers may provide consumers with additional pricing information, 
including regarding rebates or other incentive pricing, so long as the 
offering price remains clear and conspicuous, and any additional 
information is truthful and non-misleading and otherwise complies with 
part 463 and existing law.
    Another dealership association commenter urged the Commission to 
consider using an existing definition, including a State-law definition 
of ``sales price'' or the definition of ``cash price'' under the Truth 
in Lending Act's Regulation Z, in lieu of its proposed offering price 
definition.\289\ The Commission notes that its offering price 
definition overlaps substantially with the commenter's suggested State-
law ``sales price'' definition, which, according to the commenter, 
requires that a vehicle's advertised price be one at which ``the dealer 
must be willing to sell the motor vehicle . . . to any retail

[[Page 633]]

buyer''; which ``must'' include certain additional charges that are 
fixed and thus can be readily included in the price at the outset, 
including ``[d]estination and dealer preparation charges''; and which 
permits only certain categories of costs and charges to be 
excluded.\290\ Based on the commenter's description, unlike the 
Commission's definition, this State-law definition permits the 
exclusion of fees ``allowed'' by law or those which the law has 
``prescribed.'' \291\ Again, the Rule permits only charges that the 
government requires the consumer to pay to be excluded from a vehicle's 
offering price, by defining ``Offering Price'' to allow only ``required 
Government Charges'' to be excluded. This difference from the State law 
described by the commenter, however, creates no conflict--a dealer 
governed by that State law will be able to comply with both 
requirements by disclosing an offering price that excludes only 
required government charges and includes allowable government charges.
---------------------------------------------------------------------------

    \289\ Comment of Tex. Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8102 at 29-30.
    \290\ Id.; see also 43 Tex. Admin. Code 215.250(a), (b) (2023).
    \291\ Comment of Tex. Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8102 at 29-30; see also 43 Tex. Admin. Code 215.250(b)(3) 
(2023).
---------------------------------------------------------------------------

    Similarly, commenters have not demonstrated any actual conflicts 
between the proposed offering price definition and TILA's definition of 
``cash price.'' \292\ Dealers can comply with both requirements by 
disclosing an offering price that excludes only required government 
charges. And the Rule's definition addresses specific unfair and 
deceptive conduct in the auto marketplace. Were offering prices to 
exclude additional categories, the resulting disclosure provision at 
Sec.  463.4(a) would permit dealers to lure consumers to dealership 
lots based on a price that is not actually the price the dealer would 
require the consumer to pay, a result that would require consumers to 
spend time traveling to the dealership and time on the lot to attempt 
to discover the true price, and that would place dealerships that 
choose to advertise the price truthfully at a competitive disadvantage.
---------------------------------------------------------------------------

    \292\ See 12 CFR 226.2(a)(9).
---------------------------------------------------------------------------

    Relatedly, commenters including an industry association contended 
that no additional regulation of pricing or credit and lease 
advertising was necessary beyond that provided by existing practice or 
by the Truth in Lending Act, the Consumer Leasing Act, and their 
implementing Regulations Z and M, and relatedly, that the Commission's 
offering price disclosure requirement duplicated, modified, or ignored 
such existing law. The disclosure requirement, however, is consistent 
with these existing legal obligations and does not disturb them; 
dealers can and should make the disclosures required under TILA and 
other laws as well as the offering price disclosure required by the 
Final Rule. The provision requires dealers to disclose simple and 
highly material pricing information under certain circumstances.\293\ 
Providing consumers with accurate and timely pricing and financing 
information is critical, especially in the context of motor vehicle 
sales.\294\
---------------------------------------------------------------------------

    \293\ The industry association commenter further contended that 
this provision would apply to dealers based on whether they have a 
service department, but this is incorrect, as explained in the 
analysis of the definition of `` `Covered Motor Vehicle Dealer' or 
`Dealer' '' in SBP III.B.2(f).
    \294\ See, e.g., Buckle Up, supra note 63, at 5 (noting consumer 
confusion about how the vehicle price they were offered was 
determined and that consumers did not understand they could 
negotiate price); id. at 9 (observing add-on products or services, 
which typically increase a vehicle's purchase price, were ``the 
single greatest area of confusion'' in the study); Att'ys Gen. of 31 
States & DC, Comment Letter on Public Roundtables: Protecting 
Consumers in the Sale and Leasing of Motor Vehicles, Project No. 
P104811, Submission No. 558507-00112-1 at 5-6 (Apr. 13, 2012), 
https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00112/00112-82927.pdf.
---------------------------------------------------------------------------

    Several commenters requested modifications to limit or expand the 
proposed definition of ``Government Charges,'' or clarification 
regarding this term's application to certain fees. For example, 
commenters, including a dealership association, urged the Commission to 
modify this proposed definition to include charges that are ``allowed 
to be charged but not required or imposed by a Federal, State, or local 
government agency, unit, or department.'' \295\ One such commenter 
provided the example of certain registration and title charges, which 
it described as ``not necessarily imposed or mandatory fees'' and for 
which ``the amount may vary, depending on the county'' and the 
dealership, and within a governmentally determined range.\296\ 
Regarding registration and title charges, to the extent such charges 
are required by a government agency, unit, or department, then they 
fall within the ``Government Charges'' definition as charges ``imposed 
by'' such agency, unit, or department. If, however, there are title, 
registration, or other fees, beyond any title and registration fees 
required by the government, that dealers are allowed, but not required, 
to charge, such fees do not fall within the ``Government Charges'' 
definition, and to the extent a dealer imposes such allowable charges 
on any consumer, such fees must be included in the offering price. Were 
the Commission to categorize such allowed, but not required, amounts as 
``Government Charges,'' dealers would be allowed to exclude them from a 
vehicle's offering price but then require consumers to pay them anyway, 
thereby allowing dealers to lure consumers to their lots based on a 
price that is not actually the price the dealer would require the 
consumer to pay--a fact that consumers would not learn until they have 
spent time traveling to the dealership and time on the lot, if they 
learn this fact at all.\297\ Further, under such circumstances, 
dealerships that choose to advertise the price truthfully would be at a 
competitive disadvantage. The Commission therefore declines to finalize 
the definition with such a modification.
---------------------------------------------------------------------------

    \295\ Comment of Tex. Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8102 at 14.
    \296\ Id.
    \297\ Indeed, as the Commission also noted in its NPRM, an 
entity that induces the first contact through false or misleading 
representation is liable under the FTC Act, regardless if the buyer 
later becomes fully informed. See, e.g., Resort Car Rental Sys., 
Inc. v. Fed. Trade Comm'n, 518 F.2d 962, 964 (9th Cir. 1975); Fed. 
Trade Comm'n v. Gill, 71 F. Supp. 2d 1030, 1046 (C.D. Cal. 1999), 
aff'd, 265 F.3d 944 (9th Cir. 2001).
---------------------------------------------------------------------------

    Commenters, including a number of dealership associations, 
contended there were burdens associated with the Commission's offering 
price disclosure requirement, claiming it would cause dealers to 
require documenting every contact with a consumer in which a specific 
vehicle was mentioned, thereby lengthening the sales process and 
increasing the recordkeeping burden. Comments regarding recordkeeping 
requirements, including records that must be created and maintained 
under this Rule, are addressed in the section-by-section analysis of 
Sec.  463.6. Here, the Commission notes that accurate pricing 
communication is already required by law. Section 463.4(a) does not 
require a complex or lengthy disclosure, is based on similar provisions 
already in operation in certain States,\298\ will operate as a key 
safeguard in States without such provisions, and, as discussed in the 
following paragraphs, addresses deceptive and unfair conduct. Further, 
this offering price requirement will save consumers time when

[[Page 634]]

shopping for a vehicle by requiring the provision of salient, material 
information early in the process and eliminating time otherwise spent 
pursuing misleading offers. For dealers already disclosing accurate 
pricing information upfront, this provision allows them to compete on 
an even playing field.
---------------------------------------------------------------------------

    \298\ For example, California and Wisconsin have similarly 
enacted laws that make it unlawful for dealerships to advertise a 
total price without including additional costs to the purchaser 
outside the mandatory fees such as tax, title, and registration 
fees. Cal. Veh. Code 11713.1(b), (c) (2023); Wis. Admin. Code. 
Trans. 139.03(3) (2023). In Louisiana, the advertised price must be 
the full cash price for which a vehicle will be sold to any and all 
members of the buying public. La. Admin. Code tit. 46, pt. V, 719 
(2023).
---------------------------------------------------------------------------

    Another industry association commenter contended that, by requiring 
offering price to be disclosed when an advertisement references a 
specific vehicle or represents a monetary amount or financing term ``by 
implication,'' the Commission's disclosure requirement could apply to 
advertisements that merely list a dealer's website, on which specific 
vehicles and their prices appear. Under the Commission's proposal, an 
advertisement that does not expressly reference a specific vehicle or 
expressly refer to a monetary amount or financing term would not do so 
``by implication'' solely by referring to a website, document, or other 
destination where such information may otherwise be available, absent 
evidence that the net impression of a reasonable consumer is that the 
advertisement implicitly references such terms.\299\ The phrasing in 
the Commission's requirement--``expressly or by implication''--refers 
to the nature of the claims conveyed by a dealer's advertisement (i.e., 
whether such claims are made expressly or by implication). For more 
than three decades, the Commission has explained express and implied 
claims as follows:
---------------------------------------------------------------------------

    \299\ See FTC Policy Statement on Deception, supra note 42, at 
2, 5 (describing the Commission's ``net impression'' standard for 
determining the meaning of an advertisement).

    Express claims directly state the representation at issue. 
Implied claims are any claims that are not express. They range on a 
continuum from claims that would be ``virtually synonymous with an 
express claim through language that literally says one thing but 
strongly suggests another to language which relatively few consumers 
would interpret as making a particular representation.'' \300\
---------------------------------------------------------------------------

    \300\ Kraft, Inc., 114 F.T.C. 40, 120 (1991) (quoting Thompson 
Med. Co., Inc., 104 F.T.C. 648, 788 (1984), aff'd, 791 F. 2d 189 
(D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987)).

    This same industry association commenter contended that its 
aforementioned concerns--that the disclosure requirement would prohibit 
dynamic pricing, and that the requirement would extend to 
advertisements simply by virtue of their referencing a dealer's 
website--would together cause dealers to curb their pricing 
representations in advertising, either by limiting such representations 
to a vehicle's MSRP or by factoring out pricing altogether. As 
previously discussed, these concerns appear to misunderstand either 
existing legal requirements or the fact that an offering price 
disclosure would operate consistent with those requirements. The 
Commission's requirement simply requires dealers to disclose an 
offering price and does not alter the current status quo on pricing 
accuracy. To the extent there is a concern that requiring accurate 
pricing information limits dealers to advertising MSRP or forgoing 
advertising pricing information altogether, such concerns apply equally 
under current law--including in States with pricing disclosure 
requirements that resemble the Commission's offering price disclosure 
requirement. The Commission, however, has not been presented with 
evidence suggesting that dealers will not want to distinguish 
themselves from other dealers on price, and will instead default to 
advertising a price that is offered by all of their competitors.
    Another concern raised by this same industry association commenter 
was that, by requiring an offering price ``in the Dealer's first 
response'' to a consumer communication that references a specific 
vehicle or a monetary amount or financing term for any vehicle, the 
requirement would prohibit dealers from explaining the offering price 
and why it is being provided, and that as a result, consumers may 
understand the offering price to be non-negotiable. Under Sec.  463.4, 
however, dealers continue to be permitted to communicate accurate 
additional information, including the availability of discounts or the 
dealer's willingness to negotiate, as long as the offering price 
disclosure remains clear and conspicuous.
    The same industry association commenter asserted that mandating the 
disclosure of the offering price in connection with ``any communication 
with a consumer'' would result in excessive and non-responsive 
disclosures. The commenter provided the example of a consumer who 
contacts a dealership to ask whether the dealership has ``a silver 
[Ford] F-150 in stock,'' arguing that the Commission's proposal would 
require the dealer to respond with offering price information for each 
of the numerous (in the commenter's example, 40) silver F-150 vehicles 
the dealer has in stock. To begin, if the entire communication simply 
asks, ``Do you have a silver Ford F-150 in stock?,'' it does not 
concern a ``specific vehicle''; it concerns a group of vehicles--silver 
Ford F-150s--and, under Sec.  463.4, the dealer is not required to 
disclose an offering price, so long as the dealer's reply does not 
reference either (1) a specific vehicle or (2) a monetary amount or 
financing term for any vehicle, whether a specific vehicle or a group 
of vehicles.\301\ If, however, the dealer chooses to respond by 
discussing a specific vehicle--whether by describing that vehicle, 
referring to a stock or VIN number, or using other means--the dealer is 
required to disclose the offering price for that specific vehicle. If 
the dealer chooses to respond by discussing several specific vehicles, 
the offering price disclosure requirement applies for each such 
vehicle. Finally, the offering price disclosure requirement applies if 
the dealer's response references a monetary amount or financing term, 
such as a down payment or monthly payment amount, for a specific 
vehicle or a group of vehicles. This requirement applies only to the 
dealer's first response regarding the specific vehicle. It does not 
apply to subsequent communications about that specific vehicle.
---------------------------------------------------------------------------

    \301\ See Any (def. 1), Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/any (defining ``any'' as ``one or 
some indiscriminately of whatever kind'').
---------------------------------------------------------------------------

    The failure to disclose a vehicle's offering price in an 
advertisement or other communication that references a specific 
vehicle, or a monetary amount or financing term for any vehicle, is 
likely to cause substantial injury to consumers who waste time and 
effort pursuing offers that are not actually available or end up paying 
more for a vehicle than they expected or being subject to hidden 
charges.
    Buying or leasing a vehicle is time-consuming and often the most 
expensive purchase a consumer makes without knowing the actual price of 
the product at the outset. Consumers can spend hours driving to a 
dealership.\302\ Once at the dealership, it can then take several hours 
to days to finalize a transaction \303\ before the consumer learns the 
price of the vehicle. And many consumers never learn the true price at 
all; part of the finalization process includes signing dense paperwork, 
where information regarding the price of the vehicle and charges for

[[Page 635]]

other items is easily obscured, especially if consumers are not 
provided with baseline price information around which to anchor the 
lengthy, dense discussions and process. When consumers are not provided 
with such price information, they are susceptible to hidden charges 
such as ``junk fees'' or unnecessary add-ons that can cost consumers 
thousands of dollars and significantly increase their overall 
expense.\304\ These hidden charges substantially injure consumers by 
increasing their total cost as well as their debt burden in the many 
instances where vehicle purchases are financed.\305\
---------------------------------------------------------------------------

    \302\ See, e.g., Complaint ]] 23-26, Fed. Trade Comm'n v. N. Am. 
Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022) 
(alleging that many consumers drive hours to dealerships).
    \303\ See, e.g., Auto Buyer Study, supra note 25, at 15 (noting 
that the purchase transactions in the FTC's qualitative study often 
took 5 hours or more to complete, with some extending over several 
days); Cf. 2020 Cox Automotive Car Buyer Journey, supra note 25, at 
6 (reporting average consumer time spent shopping for a vehicle at 
14 hours, 53 minutes, including 1 hour, 49 minutes visiting 
dealerships/sellers).
    \304\ See Nat'l Consumer L. Ctr., ``Auto Add-Ons Add Up: How 
Dealer Discretion Drives Excessive, Arbitrary and Discriminatory 
Pricing'' (2017), https://www.nclc.org/wp-content/uploads/2022/09/auto_add_on_charts.pdf; Complaint ]] 25, 27-28, Fed. Trade Comm'n v. 
N. Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 
2022) (alleging defendants charged thousands of consumers hundreds 
to thousands of dollars each for unauthorized add-ons, totaling in 
aggregate over $70 million since 2017); Complaint ]] 59, 61, Fed. 
Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-07329 (C.D. 
Cal. Sept. 29, 2016) (alleging unauthorized add-on charges costing 
thousands of dollars).
    \305\ According to public reports, 81% of new motor vehicle 
purchases, and nearly 35% of used vehicle purchases, are financed. 
See Melinda Zabritski, Experian Info. Sols., Inc., ``Automotive 
Industry Insights: Finance Market Report Q4 2020'' at 4, https://www.autofinancenews.net/wp-content/uploads/2021/03/2020-Q4-Auto-Finance-News-Industry-Pulse.pdf.
---------------------------------------------------------------------------

    Moreover, the consumer injury caused by the lack of price 
information is not reasonably avoidable. The dealer has sole control 
over pricing information and the timing of when it is provided to 
consumers. Even if the consumer learns of the price of the vehicle 
before finalizing the transaction, the consumer has already spent time 
and effort traveling to the dealer, on the dealership lot, and in the 
financing office, and for many, the immediate need for the vehicle for 
work, school, childcare, groceries, medical visits, and other vital 
household reasons makes it infeasible to start the process anew at a 
different dealership. Further, during the lengthy vehicle-buying 
process and in complex, dense paperwork, it is especially easy to hide 
or alter price information or include hidden charges when consumers are 
not provided with baseline price information around which to anchor the 
discussion of vehicles, monetary amounts, or financing terms.\306\
---------------------------------------------------------------------------

    \306\ See, e.g., Complaint ]] 17-19, 44, Fed. Trade Comm'n v. 
Liberty Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) 
(dealers inflated the car price on paperwork in the middle of the 
sale without the consumer's knowledge or authorization, a practice 
they internally referred to as adding ``air money''); Complaint ]] 
24-27, Fed. Trade Comm'n v. N. Am. Auto. Servs., Inc., No. 1:22-cv-
01690 (N.D. Ill. Mar. 31, 2022) (alleging that defendants buried 
charges for add-ons in voluminous paperwork, making it difficult to 
detect).
---------------------------------------------------------------------------

    The injury to consumers from a lack of price information is not 
outweighed by benefits to consumers or competition from withholding 
this basic information. Instead, upfront information about the offering 
price protects consumers from lost time and effort, supracompetitive 
prices, and unexpected charges while increasing price competition among 
dealers, who should be able to compete on truthful, standard terms. The 
costs of providing price information--which the dealer determines and 
can calculate upfront--are minimal for dealers that are already 
advertising a specific vehicle, monetary amount, or financing term, 
especially when compared to the injury to consumers.
    Thus, the failure to disclose a vehicle's offering price in an 
advertisement or other communication that references a specific 
vehicle, or a monetary amount or financing term for any vehicle is an 
unfair practice.
    The Commission notes that Sec.  463.4(a)(1) and (2) affects only 
dealers that are already advertising about specific vehicles or 
monetary amounts or financing terms; it does not affect businesses that 
do not expend funds on advertising specific vehicles, monetary amounts, 
or financing terms. The Commission will continue to monitor the market 
to assess whether this approach is sufficient to address the harms 
associated with a lack of price and charge information. If not, the 
Commission will revisit whether additional measures are necessary, such 
as requiring price information in all advertising, requiring total 
charge estimates, or prohibiting charges for additional items along 
with a vehicle sale.
    Regarding deception, price is one of the most material pieces of 
information for a consumer in making an informed purchasing 
decision.\307\ Yet, including as illustrated by the Commission's law 
enforcement efforts, it can be difficult for consumers to uncover the 
actual price for which a dealer will sell an advertised vehicle until 
visiting the dealership and spending hours on the lot. When an 
advertisement or other communication references a monetary amount or 
financing term, it is reasonable for a consumer to expect that those 
amounts and terms are available at other standard terms. If instead, 
for example, a dealer advertises a low monthly payment based on an 
unexpectedly long financing term or an unexpectedly high interest rate 
that results in a higher price than standard terms would have, then the 
consumer is lured to the dealership based on a misimpression of what 
they reasonably expect the total price to be.
---------------------------------------------------------------------------

    \307\ See, e.g., Fed. Trade Comm'n. v. Windward Mktg., Inc., 
1997 WL 33642380, at *10 (N.D. Ga. Sept. 30, 1997)) (``[A]ny 
representations concerning the price of a product or service are 
presumptively material.''); Thompson Med. Co., Inc., 104 F.T.C. 648, 
817 (1984); see also Fed. Trade Comm'n v. Crescent Pub. Grp., Inc., 
129 F. Supp. 2d 311, 321 (S.D.N.Y. 2001) (``Information concerning 
prices or charges for goods or services is material, as it is 
`likely to affect a consumer's choice of or conduct regarding a 
product.' '').
---------------------------------------------------------------------------

    If a dealer advertises a specific vehicle, it is reasonable for a 
consumer to expect to learn the true offering price of the vehicle upon 
visiting the dealership. Consumers are misled when dealers misrepresent 
or otherwise obscure price information or charge for items beyond the 
advertised vehicle during the long and complex sales, financing, and 
leasing process.\308\
---------------------------------------------------------------------------

    \308\ Consumers who expect particular prices, based on the MSRP 
or Kelley Blue Book, are also misled when true pricing information 
is not disclosed upfront. See, e.g., Individual commenter, Doc. No. 
FTC-2022-0046-1878 (``We ended up having to drive 3 hours to get the 
[vehicle we] wanted. Upon arriving to pickup the car we were told 
there was a 4300 increase over MSRP.''); Individual commenter, Doc. 
No. FTC-2022-0046-1690 (``It was only after five hours at the 
dealership that we discovered the dealer had added on a $3000 market 
adjustment and $3100 in other add-ons (nitrogen-filled tires, 
LoJack, paint protection) to MSRP.''). The average transaction price 
of a new vehicle exceeded the average manufacturer's suggested 
retail price (MSRP) for twenty consecutive months between 2021 and 
2023. See Cox Auto., ``After Nearly Two Years, New-Vehicle 
Transaction Prices Fall Below Sticker Price in March, According to 
New Data from Kelley Blue Book'' (Apr. 11, 2023), https://www.coxautoinc.com/market-insights/kbb-atp-march-2023/; see also 
Edmunds, ``8 Out of 10 of Car Shoppers Paid Above Sticker Price for 
New Vehicles in January, According to Edmunds'' (Feb. 15, 2022), 
https://www.edmunds.com/industry/press/8-out-of-10-of-car-shoppers-paid-above-sticker-price-for-new-vehicles-in-january-according-to-edmunds.html; iSeeCars, ``10 New Cars Priced the Highest Over MSRP, 
Even as Peak Pricing Eases'' (Mar. 19, 2023), https://www.yourerie.com/news/10-new-cars-priced-the-highest-over-msrp-even-as-peak-pricing-eases/ (finding the average new car price was 8.8% 
over MSRP).
---------------------------------------------------------------------------

    If consumers knew that the true price was beyond what was expected 
or that the prices and charges were for unwanted items, that would 
likely affect their choice to visit one dealership over another 
dealership. Thus, misleading consumers about price information is 
material. See, e.g., Fed. Trade Comm'n v. Windward Mktg., Inc., No. 
Civ.A. 1:96-CV-615F, 1997 WL 33642380, at *10 (N.D. Ga. Sept. 30, 1997) 
(``[A]ny representations concerning the price of a product or service 
are presumptively material.'' (citing Removatron Int'l Corp., 111 
F.T.C. 206, 309 (1988));

[[Page 636]]

Thompson Med. Co., Inc., 104 F.T.C. 648, 817 (1984)); see also Fed. 
Trade Comm'n v. Crescent Pub. Grp., Inc., 129 F. Supp. 2d 311, 321 
(S.D.N.Y. 2001) (``Information concerning prices or charges for goods 
or services is material, as it is `likely to affect a consumer's choice 
of or conduct regarding a product.' '').\309\
---------------------------------------------------------------------------

    \309\ Even if some consumers were not misled by the failure to 
disclose the offering price, to show deception under the FTC Act, 
``the FTC need not prove that every consumer was injured. The 
existence of some satisfied customers does not constitute a defense. 
. . .'' Fed. Trade Comm'n v. Amy Travel Serv., Inc., 875 F.2d 564, 
572 (7th Cir. 1989), vacated in part on other grounds, Fed. Trade 
Comm'n v. Credit Bureau Ctr., LLC, 937 F.3d 764 (7th Cir. 2019); 
accord Fed. Trade Comm'n v. Stefanchik, 559 F.3d 924, 929 n.12 (9th 
Cir. 2009).
---------------------------------------------------------------------------

    Thus, it is an unfair or deceptive act or practice for dealers to 
fail to disclose the offering price in an advertisement or other 
communication that references, expressly or by implication, a specific 
vehicle or any monetary amount or financing term for any vehicle.
    Furthermore, this provision also serves to prevent the 
misrepresentations prohibited by Sec.  463.3--including 
misrepresentations regarding costs or add-ons--by requiring consumers 
to be told the true price of the vehicle in advertisements and other 
communications. It also helps prevent dealers from failing to obtain 
the express, informed consent of consumers for charges, as addressed by 
Sec.  463.5(c).\310\ Thus, the Commission is requiring dealers to 
disclose a vehicle's offering price when advertising or otherwise 
communicating about a specific vehicle or monetary amount or financing 
term for any vehicle. This provision allows consumers to compare offers 
based on the same price terms and to select dealers that truly offer 
the lowest price rather than dealers that advertise deceptively low 
prices but charge more. When price information in the market is 
distorted or concealed--especially in document- and time-intensive 
vehicle transactions--consumers are unable to effectively differentiate 
between sellers, and sellers trying to deal honestly with consumers are 
put at a competitive disadvantage.
---------------------------------------------------------------------------

    \310\ See 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' unfair or 
deceptive acts or practices).
---------------------------------------------------------------------------

    For the foregoing reasons, and having considered the comments that 
it received on this proposed provision, the Commission is finalizing 
the offering price provision at Sec.  463.4(a) with modifications to 
capitalize the defined term ``Vehicle'' in its singular, plural, and 
possessive forms, to correspond to the revised definition at Sec.  
463.2(e), and to add language clarifying that the provision is also 
prescribed for the purpose of preventing unfair or deceptive acts or 
practices defined in this Rule. The Commission is finalizing the 
corresponding ``Offering Price'' and ``Government Charges'' definitions 
in Sec.  463.2 largely as proposed, with modifications to the 
``Offering Price'' definition to conform with the defined term 
``Vehicle'' and to clarify that dealers may, but need not, exclude 
required government charges from a vehicle's offering price, and a 
typographical modification to the ``Government Charges'' definition to 
include a serial comma for consistency.
(b) Add-On List
    The Commission's proposed add-on list disclosure provision 
(proposed Sec.  463.4(b)) required the disclosure, both online and at 
each dealership, of a list of all optional add-ons for which the dealer 
charges consumers and the price of each such add-on.\311\ As proposed, 
if the price of the add-on varies based on the specifics of the 
transaction, the add-on list would have to include the range the 
typical consumer will pay.\312\ Due to space constraints, dealer 
advertisements presented not online but in another format--such as in 
print, radio, or television--would not be required to include the add-
on list, disclosing instead the website, online service, or mobile 
application where consumers can access the add-on list.\313\
---------------------------------------------------------------------------

    \311\ To the extent any add-on charges are required by a 
dealership, and thus are not optional, such charges would have to be 
included in the offering price, pursuant to Sec. Sec.  463.2(k) and 
463.4(a).
    \312\ See NPRM at 42044 (noting, in the definition of ``Add-on 
List'' at proposed Sec.  463.2(b) that ``[i]f the Add-on price 
varies, the disclosure must include the price range the typical 
consumer will pay instead of the price''); see also Fed. Trade 
Comm'n v. Five-Star Auto Club, Inc., 97 F. Supp. 2d 502, 528 
(S.D.N.Y. 2000) (``at the very least it would have been reasonable 
for consumers to have assumed that the promised rewards were 
achieved by the typical Five Star participant''); Complaint ]] 28-
50, Fed. Trade Comm'n v. Universal City Nissan, Inc., No. 2:16-cv-
07329 (C.D. Cal. Sept. 29, 2016) (alleging unlawful deception where 
a dealer's ads list prominent terms not generally available to 
consumers, including where those terms are subject to various 
qualifications or restrictions); Complaint ]] 8-10, Progressive 
Chevrolet Co., No. C-4578 (F.T.C. June 13, 2016) (alleging 
advertised offer was deceptive because the typical consumer would 
not qualify for the offer).
    \313\ Working in tandem, proposed Sec.  463.4(b)(1) and (2) 
would mean that dealers who engage in advertising and charge for 
optional add-ons must have a website, online service, or other 
mobile application by which to disclose an add-on list.
---------------------------------------------------------------------------

    Many commenters, including consumer advocacy organizations, 
supported the proposal to require dealers to provide consumers with 
clear, accurate pricing information for add-on products or services 
altogether in one list. Some commenters raised concerns that, without 
significant modification, the Commission's proposal to allow for the 
disclosure of price range information where the price of an add-on 
varies based on the specifics of the transaction would allow for 
significant abuses, including by permitting dealers to disclose ranges 
so broad they would be meaningless. Such commenters urged the 
Commission to modify its definition of ``Add-on List'' to require, 
where a price range is listed for a given add-on, the add-on list 
further indicate the low, median, and high prices charged to consumers 
for each such add-on over the preceding two years; or that the 
Commission require dealers to create individualized add-on lists for 
each vehicle sold, containing one fixed, non-negotiable price for each 
add-on. Relatedly, other commenters, including industry organizations, 
expressed concerns regarding the add-on list proposal, including that 
the proposal to allow for price range information was vague or 
confusing, and that certain aspects of the proposed definition, 
including the scope of add-ons covered, as well as the requirement to 
keep such add-on lists updated, would impose extensive economic 
burdens.
    After careful review of the comments, the Commission has determined 
not to finalize its proposed add-on list provision (proposed Sec.  
463.4(b)). Here, the Commission believes its proposal would benefit 
from further review and refinement. The Commission nevertheless 
emphasizes that, under existing law, dealers are prohibited from 
misrepresentations regarding material information about any costs, 
limitation, benefit, or any other aspect of an add-on, and from 
charging for add-ons without obtaining the express, informed consent of 
the consumer--conduct which the Final Rule prohibits as well, including 
in Sec. Sec.  463.3(b) and Sec.  463.5(c). The Commission also 
emphasizes that, in addition to the Rule's prohibitions, industry 
guidance and effective self-regulatory efforts can serve a role in 
helping prevent problematic dealer behavior in this area. The 
Commission will continue to monitor the motor vehicle marketplace for 
issues pertaining to add-ons and will consider implementing additional 
measures in the future if it determines such measures are warranted to 
address deceptive or unfair acts or practices related to add-on 
products or services.
(c) Add-Ons Not Required
    For optional add-on products or services, the Commission's proposed 
Sec.  463.4(c) required dealers to disclose, when making any 
representation about

[[Page 637]]

an optional add-on, that the add-on is not required and the consumer 
can purchase or lease the vehicle without the add-on. For the reasons 
discussed in the paragraphs that follow, the Commission is finalizing 
the required disclosure at Sec.  463.4(c) largely as proposed. The 
Commission is capitalizing the defined term ``Vehicle'' to conform with 
the definition at Sec.  463.2(e). The Commission also is adding 
language to the end of Sec.  463.4(c) clarifying that the requirements 
in Sec.  463.4(c) ``also are prescribed for the purpose of preventing 
the unfair or deceptive acts or practices defined in this part, 
including those in Sec. Sec.  463.3(a) and (b) and 463.5(c).''
    A number of commenters, including a group of State attorneys 
general, supported this proposed requirement, contending that 
unscrupulous dealers have exploited the vehicle sales process to saddle 
consumers with unwanted add-on products or services, and that such a 
disclosure would importantly help consumers avoid discovering these 
additional charges only after completing the purchase, assenting to 
them because they believed the add-ons to be required in order to 
purchase the vehicle, or paying for them unknowingly because they never 
uncovered the charges. Many individual commenters also stressed the 
need for add-on disclosure requirements. For example:
    <bullet> Salespeople such as myself are responsible for selling the 
car and all aftermarket/add-on products. This has put me in a unique 
position to see how these proposed regulations would impact automotive 
sales. I cannot stress enough my support for these new rules. . . . The 
payments calculated by management include add-ons, but the price of the 
add-ons and how they affect the payments are not shown. The add-ons 
``packed'' in the first payment often include an extended warranty, GAP 
insurance, tire and wheel protection, an oil change package, a theft 
recovery device, and sometimes more depending on the situation.\314\
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    \314\ Individual commenter, Doc. No. FTC-2022-0046-3693.
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    <bullet> Car buying is one of the most miserable consumer 
experiences in existence. Frankly, I'm disappointed that this issue 
hasn't been addressed decades ago. It's well past time that the 
deceptive practices that car dealers use to manipulate and take 
advantage of customers is made illegal. What other business can legally 
lie about the price of the product that they sell, and slip extra 
unwanted products into the deal that they don't reveal and won't remove 
upon request? These practices are arcane and unfair, especially 
considering the absurd cost of automobiles today. I wholeheartedly 
approve of what the proposed rules are attempting to accomplish. Please 
do not allow a powerful lobbying group to limit or change good 
legislation that benefits tens of millions of Americans who currently 
dread the car buying experience for far more reasons than just 
price.\315\
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    \315\ Individual commenter, Doc. No. FTC-2022-0046-5268.
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    <bullet> . . . I am not against business making a profit, in fact 
most Americans understand businesses need to make money too, however 
most dealers will not disclose additional costs to the purchaser until 
it is time to sign paperwork for purchase. Rather than simply being 
upfront with what their desired price is and how much they make from 
the sale rather they are fed lines about ``common practices'', [sic] 
``these are normal fees'' or simply not being forthright about 
additional costs on items only installed on location at the dealerships 
to drive the price up. Even more insulting is when buyer[s] ask to have 
options removed from the vehicle dealers stall or flat out refuse to do 
so.\316\
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    \316\ Individual commenter, Doc. No. FTC-2022-0046-1365.
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    <bullet> It is about time something like this is brought up. This 
will have no effect on the honest dealers out there. . . . This will 
really help the consumer. . . . We will be able to compare apples to 
apples. You won't show up at the dealership with the lowest price only 
to find out that they have all these other fees that make them the 
least desirable of the choices. Also, adding stuff like pinstriping for 
large fees will come to an end. . . . I have no problem with a dealer 
making money. They are a business and have overhead. I have a problem 
when they try [to] gloss over everything they are trying to charge you 
for. This ruling needs to take effect. Anyone posting against it is 
someone working for a dealer. Like I mentioned before, if you are doing 
everything on the up and up, not only do you get good reviews and 
repeat business, but this ruling will not even effect [sic] you.\317\
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    \317\ Individual commenter, Doc. No. FTC-2022-0046-9883; see 
also Individual commenter, Doc. No. FTC-2002-0046-9632 (``I was told 
that GAP insurance was required to be included. . . . I [later] 
contacted and asked for copies of my contracts. On September 5 [the 
dealer] sent me an email with a credit contract attached. I am 
including it here. It says my monthly payment is over $370. It also 
shows the cash price as close to $17,000.00. I can also see it says 
the GAP is optional. I never saw this contract. I never signed this 
contract.'').
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    <bullet> I also agree that Enhanced Informed Consent in F & I 
office is necessary. One of my cohort was almost coerced into non-
equivalent decision-making scenarios in the finance office with their 
car purchases. The finance officer flat out ask[ed] them, ``did you 
want the 2 year, 30[,000] mile extended warrant[y], or the 4 year 
50[,000] mile extended warranty?'' The wife sat there and asked, ``I'm 
confused. Do I HAVE to pick one of those?'' Her husband said, ``No, 
he's trying to trick you into buying one. You don't need any at all.'' 
They then promptly threatened to walk out and the finance manager came 
out and did their paperwork without further conflict.\318\
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    \318\ Individual commenter, Doc. No. FTC-2022-0046-6816.
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    Several commenters offered support while also proposing that the 
Commission adopt additional measures to further ensure that consumers 
understand that optional add-ons are not required. One dealership 
group, for example, commenting in support of disclosures that optional 
add-ons are not required, recommended that dealers be required to 
include signage on their websites and in their showrooms or on their 
sales desks that set out both components of the Commission's proposal: 
that add-ons are not required, and that consumers may purchase or lease 
the vehicle without add-ons. Other commenters, including a consumer 
protection agency and a consumer advocacy organization, suggested that 
the Commission modify the language in proposed Sec.  463.4(c) to strike 
the ``if true'' language, asserting that all add-ons should be optional 
and not required to consummate the sale or lease of a vehicle. At least 
one individual commenter recommended that the Commission prohibit 
dealers from pre-installing add-ons.
    In response to these comments, the Commission notes that, were it 
to require signage stating, generally, that add-ons are optional, or to 
strike the ``if true'' language from this disclosure, it would cause 
consumers to be presented with information that may not be accurate in 
all circumstances. Some add-ons might already be installed on the 
vehicle or otherwise required by the dealer. As explained in SBP 
III.D.2(a) with regard to Sec.  463.4(a), charges for such add-ons must 
be included in the vehicle's offering price.\319\ In such cases, 
representing that add-ons are categorically optional would mislead

[[Page 638]]

the consumer. Relatedly, by requiring that charges for mandatory items 
be included in the vehicle's offering price, the Final Rule allows 
dealers to customize the vehicles they are selling while protecting 
consumers by requiring dealers to disclose the offering price for such 
customized vehicles. Accordingly, the Commission declines to prohibit 
the practice of pre-installing add-ons in this Final Rule, but will 
continue to monitor the market to determine whether pre-installed add-
ons require further regulation. At the same time, the Commission 
emphasizes that the protections contemplated here and elsewhere in this 
Final Rule prohibit dealers from obscuring price information and 
whether an add-on is optional, and further require dealers to obtain 
the express, informed consent of the consumer to charge a consumer for 
any add-on.
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    \319\ In such cases, however, Sec.  463.4(a) of the Final Rule 
requires these non-optional add-ons to be included in a vehicle's 
offering price; if the dealer requires the consumer to pay for them, 
they are part of the full cash price for which a dealer will sell or 
finance the vehicle to any consumer. See SBP III.D.2(a).
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    Additionally, several commenters indicated their support for the 
Commission's proposal while also recommending that the Commission 
consider further steps to protect consumers from deceptive or unfair 
practices pertaining to the inclusion of add-ons in consumer vehicle 
sales or leases. Some commenters, including a group of State attorneys 
general and a dealership association, requested that the Commission 
require dealers to disclose any mandatory add-ons and whether those 
add-ons are required in order to obtain financing, including by 
requiring such disclosure in an addendum sticker affixed to the motor 
vehicle. In response, the Commission notes that other provisions of the 
Final Rule prohibit misconduct in this area, including by requiring, at 
Sec.  463.4(a), that charges for such add-ons must be included in the 
vehicle's offering price. While consumers may benefit from repeated or 
additional disclosures, each additional disclosure requirement would 
increase both the cost to comply with the regulation and the risk of 
crowding out other important information. Given these risks, the 
Commission declines to include additional requirements regarding the 
content or form of its add-on disclosure at Sec.  463.4(c). The 
Commission will continue to monitor the market to gather additional 
information on this issue and will consider whether to modify or expand 
this or other sections in the future based on stakeholder experience 
with this provision and whether it effectively halts unlawful conduct.
    Other commenters, including consumer advocacy organizations and 
consumer attorneys and advocates, urged the Commission to adopt a 
thirty-day ``cooling-off'' period for the sale of vehicle-related add-
ons, similar to that required by the Commission for door-to-door and 
other off-premises sales,\320\ which would grant consumers time to 
review the paperwork after the transaction, and to cancel unexpected or 
otherwise unwanted add-ons for a full refund. As explained in greater 
detail in the discussion of Sec.  463.5(c), in SBP III.E.2(c), the 
Commission also has determined not to include in this Final Rule a 
``cooling-off'' period in which add-on products or services may be 
canceled. In this regard, the Commission would benefit from additional 
information, including the length of time needed for such ``cooling 
off'' rights to be effective. The Commission may consider revisiting 
this decision in the future based on actual stakeholder experience with 
the provisions of the Final Rule and whether they effectively halt 
unlawful conduct.
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    \320\ See Rule Concerning Cooling-Off Period for Sales Made at 
Homes or at Certain Other Locations, 16 CFR 429.
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    Other commenters presented questions or critiques regarding this 
proposed disclosure. As with the Commission's proposed disclosures 
generally, some commenters, including an industry association and a 
dealership association, contended that existing requirements in a 
number of States to disclose that add-ons are optional make Federal 
regulation in this area unnecessary or contradictory. As described in 
detail in SBP III.D.1, the Commission first observes that the 
functioning of such standards demonstrates the practicability of its 
proposed disclosure that add-ons are not required. To the extent a 
State requires additional disclosures regarding add-ons, nothing 
prevents dealers from providing those disclosures as well as those 
required under part 463 so long as the State disclosures are not 
inconsistent with those required under part 463. To the extent there is 
truly an inconsistency between this part and State law, Sec.  463.9 
provides that part 463 will govern, but only to the extent of the 
inconsistency, and only if the State statute, regulation, order, or 
interpretation affords consumers less protection than does the 
corresponding provision of this part. Finally, a number of States do 
not have existing standards in this area; in such States, the 
Commission's disclosures operate as a key safeguard.
    Commenters, including dealership associations, argued that dealers 
would develop and use an additional form to demonstrate compliance with 
this disclosure requirement, thereby burdening the vehicle sales and 
delivery process. The Commission begins by noting that any such steps 
are not required by part 463; on the contrary, the Commission 
structured this disclosure to provide dealers with flexibility, within 
the bounds of the law, to provide this essential information in a 
manner that is clear and conspicuous under the particular circumstances 
of their transactions. This requirement does not require a complex or 
lengthy disclosure, is based on similar provisions already in operation 
in certain States,\321\ and for dealers already disclosing accurate 
add-on information, this provision requires no significant additional 
burden.
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    \321\ See, e.g., California Car Buyer's Bill of Rights, Cal. 
Civ. Code 2981 (requiring dealers to provide a written list of 
specified items purchased and their effect on monthly payments, 
including GAP, theft deterrent devices, and surface protection 
products); Minn. Stat. 59D.06(b) (requiring any person offering a 
GAP waiver to disclose that the waiver is not required for a 
consumer to buy or lease the vehicle); Wash. Rev. Code. 
48.160.050(9) (mandating that GAP waivers disclose that ``neither 
the extension of credit, the terms of the credit, nor the terms of 
the related motor vehicle sale or lease, may be conditioned upon the 
purchase of the waiver.''); La. Stat. Ann. 32:1261(A)(2)(a) 
(declaring it unlawful for a dealer to require, as a condition of 
sale and delivery, for a consumer to purchase ``special features, 
appliances, accessories, or equipment not desired or requested by 
the purchaser.'').
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    When making a representation about an add-on product or service, 
the failure to disclose that the add-on is not required and the 
consumer can purchase or lease the vehicle without the add-on, if true, 
is likely to cause substantial injury to consumers who end up paying 
more for a vehicle sales or lease transaction than they expected by 
being subject to charges of which they are not aware or which they 
believe are required because they were never told they could decline 
the charges.
    Absent this information, consumers cannot reasonably avoid the 
injury of being charged for these products because they are not aware 
that they have an option to begin with. When consumers are presented 
with motor vehicle transaction documents that include a variety of 
charges, it is difficult to detect any charges that are added to the 
contract beyond those that are required or have been agreed upon, 
especially in a stack of lengthy, complex, highly technical, and often 
pre-populated documents, at the close of a long sales, financing or 
leasing process after an already-lengthy process of selecting the 
vehicle and negotiating over its price or payment terms. Consumers 
cannot reasonably avoid charges of which they are unaware, or regarding 
which they do not know they have a choice.

[[Page 639]]

    The injury to consumers from a lack of information about add-on 
optionality is not outweighed by benefits to consumers or competition 
from withholding this basic information. Instead, information about the 
optional nature of these products or services protects consumers from 
lost time and effort, supracompetitive transaction costs, and 
unexpected charges while increasing competition among dealers, who are 
able to compete on truthful, standard terms. Moreover, the cost of 
providing this threshold information is minimal, especially when 
compared to the injury to consumers, and providing such information is 
consistent with existing industry guidance.\322\
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    \322\ See Nat'l Auto. Dealers Ass'n et al., ``Voluntary 
Protection Products: A Model Dealership Policy'' 4 (2019), https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy (stating dealerships should ``prominently 
display to customers a poster stating that [add-on products or 
services] offered by the dealership are optional and are not 
required to purchase or lease a vehicle or obtain warranty coverage, 
financing, financing on particular terms, or any other product or 
service offered by the dealership. . . .'').
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    This provision addresses deceptive conduct as well. Throughout the 
lengthy vehicle sales, financing, or leasing process, dealers often 
discuss various different charges at various different times. Such 
charges include charges the government requires the consumers to pay 
and financing costs. Dealers then often present consumers a total 
amount to pay that differs from the advertised or sticker price. Given 
that some additional charges are required, if a dealer also discusses 
charges for items that are not required, such as optional add-ons, it 
is reasonable for consumers to believe that charges for such items are 
required. In the course of a lengthy transaction involving extensive 
negotiations, dealers can obscure such products and their associated 
charges in dense paperwork. Moreover, the omitted information is highly 
material: if consumers knew that a particular optional add-on was not 
required to purchase the vehicle, it would likely affect their choice 
about whether to purchase the add-on.\323\
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    \323\ See, e.g., Fed. Trade Comm'n. v. Windward Mktg., Inc., 
1997 WL 33642380, at *10 (N.D. Ga. Sept. 30, 1997)) (``[A]ny 
representations concerning the price of a product or service are 
presumptively material.''); Thompson Med. Co., Inc., 104 F.T.C. 648, 
817 (1984); see also Fed. Trade Comm'n v. Crescent Pub. Grp., Inc., 
129 F. Supp. 2d 311, 321 (S.D.N.Y. 2001) (``Information concerning 
prices or charges for goods or services is material, as it is 
`likely to affect a consumer's choice of or conduct regarding a 
product.' '').
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    Thus, it is an unfair or deceptive act or practice for dealers to 
fail to disclose, when making a representation about an add-on product 
or service, that the add-on is not required and the consumer can 
purchase or lease the vehicle without the add-on, if true. Further, 
this provision also serves to prevent the misrepresentations prohibited 
by Sec.  463.3--including misrepresentations regarding material 
information about the costs or terms of purchasing, financing, or 
leasing a vehicle, or about any costs, limitations, benefits, or any 
other aspect of an add-on--by requiring consumers to be told whether 
represented add-ons are optional. It also helps prevent dealers from 
failing to obtain the express, informed consent of the consumer for 
charges, as addressed by Sec.  463.5(c).\324\ Thus, the Commission is 
requiring dealers to disclose, when making representations about add-
ons, that the add-ons are not required and the consumer can purchase or 
lease the vehicle without the add-ons, if true.
---------------------------------------------------------------------------

    \324\ See 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' unfair or 
deceptive acts or practices).
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    For the foregoing reasons, and having considered all of the 
comments that it received on this proposal, the Commission is 
finalizing the required disclosure at Sec.  463.4(c) largely as 
proposed, with the minor modifications of capitalizing the defined term 
``Vehicle'' and clarifying that the requirements of Sec.  463.4(c) also 
are ``prescribed for the purpose of preventing the unfair or deceptive 
acts or practices defined in this part, including those in Sec. Sec.  
463.3(a) and (b) and 463.5(c).''
(d) Total of Payments and Consideration for a Financed or Lease 
Transaction
    Section 463.4(d) of the Commission's proposed rule required 
dealers, when making any representation about a monthly payment for any 
vehicle, to disclose the total amount the consumer will pay to purchase 
or lease the vehicle at that monthly payment after making all payments 
as scheduled. If the total amount disclosed assumes the consumer will 
provide consideration, the proposed rule required dealers to disclose 
the amount of consideration to be provided by the consumer. For the 
reasons discussed in the following paragraphs, the Commission is 
finalizing the required disclosure at Sec.  463.4(d) largely as 
proposed. The Commission is capitalizing the defined term ``Vehicle'' 
to conform with the definition at Sec.  463.2(e), and making the minor 
grammatical correction of replacing the semicolon and the word ``and'' 
at the end of Sec.  463.4(d)(1) with a period. The Commission also is 
adding language to the end of Sec.  463.4(d), at newly designated 
(d)(3), clarifying that the requirements in Sec.  463.4(d) ``also are 
prescribed for the purpose of preventing the unfair or deceptive acts 
or practices defined in this part, including those in Sec. Sec.  
463.3(a) and 463.5(c).''
    A number of commenters, including consumer advocacy organizations, 
supported this proposed requirement, contending it would provide 
essential information to the consumer while not contributing to 
information overload, and noting the information to be disclosed would 
have been calculated by the dealer in the process of determining the 
proposed monthly payment. Many individual commenters also stressed the 
need for the Commission's proposal:
    <bullet> Small businesses are a cornerstone of our economy. 
Automotive dealers, like other retailers, deserve to make a reasonable 
profit in order to maintain their physical plants, to purchase 
inventory, and to pay their staff. That being said, some auto dealers 
have for years used misleading and often out-and-out deceptive sales 
tactics (i.e., lies) to generate sales. . . . Sometimes the unwary 
consumer may not even realize that the actual price differs from the 
quoted price, because the automobile finance agent speaks only in terms 
of monthly payments rather than the total cost. The consumer may not 
even realize that he or she has been ``taken'' until a friend with an 
amortization table runs the numbers.\325\
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    \325\ Individual commenter, Doc. No. FTC-2022-0046-1216.
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    <bullet> At most dealerships, including the one I work at, when a 
customer asks to see figures on a car after a test drive, management 
goes out of their way to make sure the customer only sees the monthly 
payment. The typical numbers presented to the customer initially show 
the price of the car, the trade-in value, the down payment, and the 
monthly payment options in bold numbers at the bottom. The payments 
calculated by management include add-ons, but the price of the add-ons 
and how they affect the payments are not shown. . . . Compounding this 
issue of hidden add-ons is that salespeople are instructed to figure 
out the customer's budget beforehand (e.g., $450 per month). If the 
monthly payment with the car and add-ons comes out to be less than $450 
per month, management will often raise the price of the add-ons to get 
the payment to $450 or even slightly above.\326\
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    \326\ Individual commenter, Doc. No. FTC-2022-0046-3693.
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    <bullet> I wholeheartedly support the proposed regulation changes 
for car dealerships and the car buying process.

[[Page 640]]

As an average consumer who has bought 3 vehicles with financing and 2 
without, I can see the obvious benefit these proposed regulations would 
have on the car buying process. The vast quantities of paperwork and 
add [-]ons make it easy for car dealers to switch things around to 
their benefit. I had one dealership . . . change the term of my auto 
loan from 72 to 84 months in the middle of reprinting the final sales 
sheet because of another obvious error in the first copy. In the midst 
of all the distractions and misdirection going on, [I] didn't notice 
[`]til[l] after the fact. I felt powerless and cheated. . . .\327\
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    \327\ Individual commenter, Doc. No. FTC-2022-0046-5567.
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    <bullet> There is no reason that buying a car has to be a chore and 
so ambiguous on price. The dealer was also so twisted up on getting me 
to focus on the monthly payment and not the total price of the car and 
that is where they were able to sneak the price up. Practices like this 
are also why people have such a disdain for purchasing a new/used 
car.\328\
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    \328\ Individual commenter, Doc. No. FTC-2022-0046-2176.
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    <bullet> I have experienced many of the ``typical'' tactics that 
one hears about when negotiati[ng] with an automobile dealership, like 
the salesperson always wanting to talk about the monthly payment and 
never the actual trade-in price and sales price. . . . I agree that the 
whole car buying process could be made easier and I see no reasons that 
any fair and honest car dealership would object to these proposed 
changes/rules as they, in my estimation are all things that a fair and 
honest car dealer should be doing anyway. The only car dealers that 
should be objecting to these new rules should be the unscrupulous 
dealers.\329\
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    \329\ Individual commenter, Doc. No. FTC-2022-0046-4034.
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    <bullet> When buying a car dealers try to negotiate the monthly 
payment, so the actual total cost is hidden from the buyer until they 
get into the ``financing office'' where all kinds of unexpected add-ons 
are sprung on the consumer.\330\
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    \330\ Individual commenter, Doc. No. FTC-2022-0046-4911.
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    <bullet> I am trying to buy a new car, from the factory, with no 
modifications or alterations, is it so much to ask for? The process of 
figuring out the price of the car is impossible. The sales people are 
all about the monthly payment, when I asked them what the car price is 
the answer is always what payment are you looking for.\331\
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    \331\ Individual commenter, Doc. No. FTC-2022-0046-5958.
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    <bullet> They only want to gain the amount you can be 
``comfortable'' on your monthly payment so that they can stretch out 
the term and hammer you with hidden fees and other expenses you won[']t 
be able to see right away.\332\
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    \332\ Individual commenter, Doc. No. FTC-2022-0046-8847.
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    <bullet> Dealerships always want you to come in so they can 
manipulate you into a car you can[']t afford and pay for things you 
don't need by hiding them in a monthly payment.\333\
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    \333\ Individual commenter, Doc. No. FTC-2022-0046-6405.
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    <bullet> If we had to do our grocery shopping the same way dealers 
want us to buy a car, most Americans would starve before sunset. ``What 
kind of monthly payment are you looking for in a banana?'' is a 
conversation I should never be forced to have. . . .\334\
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    \334\ Individual commenter, Doc. No. FTC-2022-0046-3860.
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    One individual commenter requested that the Commission make clear 
that handwritten negotiation notes made by a dealer would trigger the 
requirement that this proposed disclosure be made in writing.\335\ In 
response, the Commission affirms such representations have been made 
``in writing,'' \336\ and thus, where dealers represent a monthly 
payment in such notes, this provision requires them to provide the 
disclosures in Sec.  463.4(d) in writing.
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    \335\ Individual commenter, Doc. No. FTC-2022-046-9469 at 6-7.
    \336\ See, e.g., Writing, Black's Law Dictionary (11th ed. 2019) 
(defining ``writing'' as ``[a]ny intentional recording of words in a 
visual form, whether in handwriting, printing, typewriting, or any 
other tangible form that may be viewed or heard with or without 
mechanical aids.''); cf. Fed. R. Evid. 1001(a) (defining ``writing'' 
as letters, words, numbers, or their equivalent set down in any 
form'').
---------------------------------------------------------------------------

    Other commenters, including industry associations and individual 
commenters, questioned whether the proposal would require a disclosure 
in every place a monthly payment appears on a dealer's website, or 
otherwise would be difficult or infeasible given the frequency with 
which dealers provide consumers with monthly payment information, 
suggesting that such a requirement could either overwhelm consumers or 
dissuade dealers from providing monthly payment information, or arguing 
\337\ that the proposal overlapped with other laws such as the Truth in 
Lending Act or the Consumer Leasing Act. Regarding monthly payment 
amounts appearing more than once or in multiple places, the Commission 
notes that, as proposed, this section would require disclosure of the 
total purchase or lease amount for a vehicle including any assumed 
consumer-provided consideration, and only when making a representation 
about the vehicle's monthly payment amount; it would not require a 
complex or lengthy disclosure. Consumers shop for vehicles and interact 
with online interfaces, and other advertising in many different ways; 
thus, it is important for this simple disclosure to accompany a monthly 
payment representation however a consumer might encounter it. Moreover, 
the Commission has taken into account existing disclosure 
obligations.\338\ Monthly payment amounts for motor vehicle sales or 
leases constitute so-called ``triggering terms'' under the Truth in 
Lending Act, the Consumer Leasing Act, and their implementing 
Regulations Z and M. As such, dealers currently providing such 
information, including on their websites or other online interfaces, 
are bound by existing laws that require providing consumers with 
additional terms in a clear and conspicuous way: in the case of vehicle 
credit transaction offers, this includes the terms of repayment, which 
reflect the repayment obligations over the full term of the loan; \339\ 
in the case of vehicle lease offers, this includes the number, amounts, 
and due dates or periods of scheduled payments under the lease.\340\ 
The Commission's disclosure requirement takes into account these 
existing obligations, requiring, specifically: the total amount the 
consumer will pay to purchase or lease the vehicle at a represented 
monthly payment amount including any assumed consumer-provided 
consideration. Similarly, regarding the feasibility of providing this 
disclosure as often as dealers provide consumers with monthly payment 
information: once dealers choose to make a representation about a 
monthly payment, they are capable of disclosing a total of payments for 
the consumer based on the same inputs needed to arrive at that 
voluntary monthly payment representation.
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    \337\ These association commenters made these contentions 
regarding the monthly payment disclosures at both Sec.  463.4(d) and 
(e). The Commission responds to these contentions in this section.
    \338\ One industry commenter, in expressing concern that Sec.  
463.4(d) and (e) may conflict with Regulations Z and M, questioned 
whether the FTC coordinated with the Federal Reserve Board. Several 
Senators similarly questioned whether the FTC consulted with the 
Federal Reserve Board, CFPB, or other agencies. Although the 
Commission cannot comment on specific interactions, it coordinates 
regularly with other Federal agencies, including the Federal Reserve 
Board and the CFPB.
    \339\ See 12 CFR 1026.24(b), (d)(2)(ii).
    \340\ See 12 CFR 1013.7(b), (d)(2)(iii).
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    The Commission further notes that, in the event a monthly payment 
is already being disclosed, the associated total of payment would be 
calculated with the same financing or leasing estimates used

[[Page 641]]

to calculate the monthly payment. Dealers already must be prepared to 
calculate such a total to satisfy their obligations under TILA, the 
CLA, or their implementing regulations.\341\
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    \341\ As is currently the case under Federal law and the Final 
Rule, the terms must be the terms available to the typical consumer. 
See, e.g., Fed. Trade Comm'n v. Five Star Auto Club, 97 F. Supp. 2d 
502, 528 (S.D.N.Y. 2000) (``[A]t the very least it would have been 
reasonable for consumers to have assumed that the promised rewards 
were achieved by the typical Five Star participant.''). This is 
consistent with prior FTC enforcement actions. See, e.g., Complaint 
]] 48-53, 82-84, Fed. Trade Comm'n v. Universal City Nissan, Inc., 
No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging unlawful 
deception where a dealer's advertisements list prominent terms not 
generally available to consumers, including where those terms are 
subject to various qualifications or restrictions); Complaint ]] 8-
10, Progressive Chevrolet Co., No. C-4578 (F.T.C. June 13, 2016) 
(alleging advertised offer was deceptive because the typical 
consumer would not qualify for the offer).
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    Regarding Sec.  463.4(d)'s similarity to existing laws, as 
discussed previously, this provision is indeed consistent with other 
laws, and commenters have not indicated how providing truthful 
information about total payment amounts along with information they 
already provide about monthly payment amounts would unduly burden them 
or harm consumers, or how providing such information in writing before 
providing consumers with the contract, if they are already providing 
monthly payment information in writing prior to the contract, would do 
so.
    Some dealership associations described certain elements of the 
proposal as vague or unclear, requesting that the Commission clarify 
its use of the term ``by implication'' with regard to a monthly 
payment, or alternatively, that the Commission omit the terms ``any'' 
(as it pertains to ``any representation''), ``by implication,'' and 
``indirectly'' from the proposed disclosure provision.\342\ Regarding 
the use of the term ``by implication'' with regard to a monthly 
payment, as discussed in the section-by-section analysis of Sec.  463.3 
in SBP III.C with respect to the prohibition on express or implied 
misrepresentations, the Commission notes that such language is 
consistent with longstanding law, and given that representations can 
mislead reasonable consumers even without making express claims, the 
provision could be rendered meaningless without it.\343\ Variations of 
the phrase ``expressly or by implication'' appear frequently in 
existing Commission guides and regulations,\344\ and implied claims are 
treated extensively in the longstanding FTC Policy Statement on 
Deception, which the Commission issued in 1983 to provide guidance to 
the public on the meaning of deception.\345\ Furthermore, this language 
serves to help ensure that dealers may not avoid this disclosure 
requirement by making only implied reference to monthly payments, 
including by referring to a monthly payment amount that is not 
explicitly identified as such, or by referring to a regular periodic 
payment made on a different installment basis (e.g., a biweekly 
payment) to indirectly illustrate a consumer's monthly payment 
obligations.
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    \342\ One commenter requested clarification or deletion of 
``any,'' ``by implication'' and ``indirectly'' from Sec.  463.4(c) 
and (e) for the same reasons it articulated with regard to Sec.  
463.4(d): that the terms are too vague. The explanation provided in 
the text pertains to these sections as well.
    \343\ The FTC Policy Statement on Deception and FTC cases make 
clear that both express and implied claims can be deceptive. See, 
e.g., ECM Biofilms, Inc. v. Fed. Trade Comm'n, 851 F.3d 599 (6th 
Cir. 2017) (affirming Commission's finding that an additive 
manufacturer's unqualified biodegradability claim conveyed an 
implied claim that its plastic would completely biodegrade within 
five years); POM Wonderful LLC, Doc. No. C-9344 (F.T.C. Jan. 10, 
2013) (Opinion of the Commission), generally aff'd by POM Wonderful, 
LLC v. Fed. Trade Comm'n, 777 F.3d 478 (D.C. Cir. 2015) (finding 
that company's advertisements would reasonably be interpreted by 
consumers to contain an implied claim that POM products treat, 
prevent, or reduce the risk of certain health conditions and for 
some ads that these effects were clinically proven); Kraft, Inc. v. 
Fed. Trade Comm'n, 970 F.2d 311 (7th Cir. 1992) (affirming finding 
of deception where Kraft advertisements juxtaposed references to the 
milk contained in Kraft singles and the calcium content of the milk, 
the combination of which implied that each Kraft single contained 
the same amount of calcium as five ounces of milk). Further, to be 
considered reasonable, the interpretation or reaction does not have 
to be the only one; when a seller's representation conveys more than 
one meaning to reasonable consumers, one of which is false, the 
seller is liable for the misleading interpretation. See FTC Policy 
Statement on Deception, supra note 42, at 3. Further, an 
interpretation will be presumed reasonable if it is the one the 
respondent intended to convey. Id.
    \344\ See, e.g., Telemarketing Sales Rule, 16 CFR 310.3(a)(2) 
(prohibiting ``[m]isrepresenting, directly or by implication, in the 
sale of goods or services'' a list of ten categories of material 
information); 16 CFR 310.2(o) (defining ``debt relief service'' as 
any program or service ``represented, directly or by implication, to 
renegotiate, settle, or in any way alter'' certain terms); 16 CFR 
310.5(a)(2) (requiring telemarketers to keep records of certain 
prize and prize-recipient information ``for prizes that are 
represented, directly or by implication, to have a value of $25.00 
or more''); Business Opportunity Rule, 16 CFR 437.1(c) (defining a 
``(b)usiness opportunity'' as a commercial arrangement in which, 
among other criteria, ``[t]he seller, expressly or by implication, 
orally or in writing, represents that'' it will provide, inter alia, 
business locations, outlets, accounts, or customers); Disclosure 
Requirements and Prohibitions Concerning Franchising, 16 CFR 
436.1(e) (defining ``(f)inancial performance representation'' as any 
representation to a prospective franchisee that states, ``expressly 
or by implication, a specific level or range'' of sales, income, or 
profits); Military Credit Monitoring Rule, 16 CFR 609.3(e) 
(describing as prohibited materials those that ``expressly or by 
implication'' represent certain ``interfering, detracting, 
inconsistent, and/or undermining'' information); Rules and 
Regulations Under Fur Products Labeling Act, 16 CFR 301.14 
(requiring an ``unknown'' origin disclosure when ``no 
representations are made directly or by implication'' regarding the 
origin of used furs); 16 CFR 301.18 (regulating the ``passing off'' 
of domestic furs as imported by prohibiting labeling, invoicing, or 
advertising that ``represent[s] directly or by implication'' that 
such furs have been imported); 16 CFR 301.43 (regulating the use of 
deceptive trade or corporate names by prohibiting any 
``representation which misrepresents directly or by implication'' 
certain information); Power Output Claims for Amplifiers Utilized in 
Home Entertainment Products, 16 CFR 432.1(a) (defining the 
regulation's scope when certain amplifier features or 
characteristics are ``represented, either expressly or by 
implication, in connection with the advertising, sale, or offering 
for sale'').
    \345\ See FTC Policy Statement on Deception, supra note 42, at 
2.
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    These same reasons also counsel against deleting the terms ``any'' 
and ``indirectly'' from this proposed disclosure provision. To begin, 
one dealership association commenter suggested deleting these terms 
from the regulatory text, but did not explain the nature of its 
specific concern regarding its use of the term ``any,'' instead 
claiming generally that the terms with which the commenter took issue 
were ``broad,'' ``vague,'' and ``imprecise.'' As proposed, the 
Commission's total payments disclosure would be required when a dealer 
makes ``any representation . . . about a monthly payment for any 
vehicle.'' These disclosure circumstances are markedly similar to those 
under Regulation Z and Regulation M: Regulation Z requires the 
disclosure of additional payment terms when ``any'' of a number of 
terms is set forth, including ``[t]he amount of any payment''; \346\ 
Regulation M similarly requires the disclosure of additional terms when 
``any'' of a number of items is stated, including ``[t]he amount of any 
payment.'' \347\ The use of the term ``any'' is consistent with 
existing law, and thus is not confusing or impracticable. Furthermore, 
as with representations made ``by implication,'' the Commission has a 
longstanding practice of regulating representations made ``indirectly'' 
in the same manner as those made directly,\348\

[[Page 642]]

and it does so to help ensure that its requirements are effective and 
not easily avoided. The Commission thus declines to modify their usage 
in Sec.  463.4(d).
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    \346\ 12 CFR 1026.24(d) (emphasis added).
    \347\ 12 CFR 1013.7(d) (emphasis added).
    \348\ See, e.g., Business Opportunity Rule, 16 CFR 437.6 
(prohibiting ``any seller, directly or indirectly through a third 
party'' from engaging in certain prohibited practices); Credit 
Practices Rule, 16 CFR 444.2 (prohibiting as unfair ``a lender or 
retail installment seller directly or indirectly'' taking or 
receiving certain obligations from a consumer); 16 CFR 444.3 
(prohibiting as deceptive ``a lender or retail installment seller, 
directly or indirectly'' misrepresenting cosigner liability, and 
prohibiting as unfair ``a lender or retail installment seller, 
directly or indirectly'' obligating a cosigner under certain 
circumstances); 16 CFR 444.4 (prohibiting as unfair the act or 
practice of ``a creditor, directly or indirectly'' levying or 
collecting certain late charges); Telemarketing Sales Rule, 16 CFR 
310.3(a)(3) (prohibiting as deceptive the act or practice of 
``[c]ausing billing information to be submitted for payment, or 
collecting or attempting to collect payment for goods or services or 
a charitable contribution, directly or indirectly'' without express 
verifiable authorization); 16 CFR 310.4(a)(7) (prohibiting as 
abusive the act or practice of ``[c]ausing billing information to be 
submitted for payment, directly or indirectly, without the express 
informed consent of the customer or donor''); Mail, internet, or 
Telephone Order Merchandise Rule, 16 CFR 435.1(f) (defining 
``Telephone'' as ``any direct or indirect use of the telephone to 
order merchandise. . . .''); Preservation of Consumers' Claims and 
Defenses, 16 CFR 433.2 (prohibiting as an unfair or deceptive act or 
practice ``for a seller, directly or indirectly'' to take or receive 
a consumer credit contract which does not contain the Commission's 
``Holder Rule'' provision); Prohibition of Energy Market 
Manipulation Rule, 16 CFR 317.3 (declaring ``[i]t shall be unlawful 
for any person, directly or indirectly'' to engage in certain energy 
market manipulation practices); Trade Regulation Rule Pursuant to 
the Telephone Disclosure and Dispute Resolution Act of 1992, 16 CFR 
308.7(i) (declaring that regulated persons may not ``report or 
threaten directly or indirectly to report adverse information'' on a 
consumer report under certain circumstances).
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    Some commenters, including a dealership association, questioned 
whether the disclosure requirement would require dealers to obtain 
individuals' consumer reports before providing monthly payment 
information. In response, the Commission notes that Sec.  463.4(d) does 
not alter the status quo regarding the information a dealer must have 
in order to represent a monthly payment amount. As previously 
discussed, this provision does not require disclosure of a monthly 
payment; instead, if a dealer chooses to represent a monthly payment 
amount, Sec.  463.4(d) requires a corresponding disclosure of ``the 
total amount the consumer will pay to purchase or lease the vehicle at 
that monthly payment.'' As previously explained in detail, dealers are 
capable of disclosing a total of payments for the consumer based on 
such voluntary monthly payment representations. Furthermore, to the 
extent a dealer may be providing consumers with estimated monthly 
payment information, the dealer may use the same assumptions used for 
estimating the monthly payment in order to determine the total of 
payments. Further, as is required under other law and this Rule, the 
dealer must refrain from deception, including by avoiding assumptions 
that the consumer would not reasonably expect or for which the consumer 
would not reasonably qualify.\349\
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    \349\ Importantly, as is the case under current law, a dealer 
may not mislead the consumer about the likelihood of qualifying for 
any particular credit or leasing terms in the course of providing 
this disclosure. Generally speaking, such deception is less likely 
where the dealer communicates to the consumer any assumptions it may 
have made, along with the basis for any such assumptions, in a 
manner in which the consumer understands this information.
---------------------------------------------------------------------------

    When making a representation, expressly or by implication, directly 
or indirectly, about a monthly payment for any vehicle, the failure to 
disclose the total amount the consumer will pay, inclusive of any 
consideration, to purchase or lease the vehicle at that monthly payment 
after making all payments as scheduled is likely to cause substantial 
injury to consumers who waste time and effort pursuing offers that are 
not actually available at reasonably expected terms; or who pay more 
for a vehicle sales or lease transaction than they expected by being 
subject to hidden charges or an unexpected down payment or trade-in 
requirement; or who are subject to the higher financing or leasing 
costs and greater risk of default associated with an unexpectedly 
lengthy loan or lease term. Moreover, when a consumer pays for his or 
her vehicle over a longer period of time, there is an increased 
likelihood that negative equity will result when the consumer needs or 
wants to purchase or lease another vehicle, because a vehicle's value 
tends to decline faster than the amount owed.\350\ Longer motor vehicle 
financing term lengths also have higher rates of default, potentially 
posing greater risks to both borrowers and financing companies.\351\ 
Even if a consumer eventually learns the true total payment, or later 
learns that the terms being discussed are based on a previously 
undisclosed requirement that the consumer provide consideration, such 
as a down payment, the consumer cannot recover the time spent pursuing 
the offer that the consumer had expected.
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    \350\ Buckle Up, supra note 63, at 7.
    \351\ Consumer Fin. Prot. Bureau, ``Quarterly Consumer Credit 
Trends: Growth in Longer-Term Auto Loans'' 7-8 (Nov. 2017), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-trends_longer-term-auto-loans_2017Q2.pdf; see also Zhengfeng Guo et 
al., Off. of the Comptroller of the Currency, ``A Puzzle in the 
Relation Between Risk and Pricing of Long-Term Auto Loans'' 2, 4-5, 
20 (June 2020), https://www.occ.gov/publications-and-resources/publications/economics/working-papers-banking-perf-reg/pub-econ-working-paper-puzzle-long-term-auto-loans.pdf (finding motor vehicle 
financing with six-plus-year terms have higher default rates than 
shorter-term financing during each year of their lifetimes, after 
controlling for borrower and loan-level risk factors).
---------------------------------------------------------------------------

    The injury caused by the failure to disclose the total amount and 
consideration is not reasonably avoidable. As the Commission has 
observed previously, withholding total payment information enables 
dealers to focus consumers on the monthly payment amount in isolation. 
Under such circumstances, dealers may add unwanted, undisclosed, or 
even fictitious add-on charges more easily, since consumers may not 
notice the relatively small changes an add-on charge makes when 
secreted within a monthly vehicle payment, despite the fact that such 
hidden charges can cost a consumer more than a thousand dollars over 
the course of an auto financing or lease term.\352\ The absence of 
information concerning the total of payments--which is within the sole 
control of the dealership--also enables dealers to use claims regarding 
monthly payment amounts to falsely imply savings or parity between 
different offers where reduced monthly payments increase the total 
vehicle cost due to an increased payment term or annual percentage 
rate.
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    \352\ See Auto Buyer Study, supra note 25, at 14 (``[T]he dealer 
can extend the maturity of the financing to reduce the effect of the 
add-on on the monthly payment, obscuring the total cost of the add-
on''); Auto Buyer Study: Appendix, supra note 66, at 229, 233 (Study 
participant 457481) (dealership pitching add-ons at the end of the 
negotiation, and in terms of consumer's monthly price); Auto Buyer 
Study: Appendix, supra note 66, at 701 (Study participant 437175) 
(dealership pitching add-ons in terms of monthly price); see also 
Complaint ]] 12-19, Fed. Trade Comm'n v. Liberty Chevrolet, Inc., 
No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging dealership 
included deceptive and unauthorized add-on charges in consumers' 
transactions); Complaint ]] 21-28, Fed. Trade Comm'n v. Ramey 
Motors, No. 1:14-cv-29603 (S.D. W. Va. Dec. 11, 2014) (alleging 
dealer emphasized attractive terms such as low monthly payments but 
concealed substantial cash down payments or trade-in requirements); 
Complaint ]] 38-46, Fed. Trade Comm'n v. Billion Auto, Inc., No. 
5:14-cv-04118-MWB (N.D. Iowa Dec. 11, 2014) (alleging dealer touted 
attractive terms such as low monthly payments but concealed 
significant extra costs).
---------------------------------------------------------------------------

    The injury to consumers from a lack of total payment information is 
not outweighed by benefits to consumers or competition from withholding 
this basic information. Instead, the burden of disclosing this 
information--which the dealer determines and can calculate upfront--is 
minimal for dealers who are already making representations about a 
monthly payment for a vehicle, especially when compared to the injury 
to consumers.
    Regarding deception, as detailed in the NPRM and in this SBP, cost 
is one of the most material pieces of information for a consumer in 
making an informed purchasing decision.\353\ Yet it can be difficult 
for consumers to uncover the actual costs, and their

[[Page 643]]

actual associated terms, for which a dealer will sell or lease an 
advertised vehicle until visiting the dealership and spending hours on 
the lot. When an advertisement or other communication references a 
monetary amount or financing term, it is reasonable for a consumer to 
expect that those amounts and terms are available for a vehicle at 
other standard terms, and, in the absence of information to the 
contrary, that no down payment or other consideration is required. If 
instead, for example, a dealer advertises a low monthly payment based 
on an unexpectedly long financing term or unexpectedly high interest 
rate that results in a higher total payment than standard terms would 
have yielded, or based on an expected but undisclosed down payment or 
other consideration to be provided by the consumer, the consumer will 
be induced to visit the dealership based on a misimpression of what 
they reasonably expect the total payment to be.
---------------------------------------------------------------------------

    \353\ See, e.g., Fed. Trade Comm'n v. Windward Mktg., Inc., No. 
Civ.A. 1:96-CV-615F, 1997 WL 33642380, at *10 (N.D. Ga. Sept. 30, 
1997) (``[A]ny representations concerning the price of a product or 
service are presumptively material.''); Removatron Int'l Corp., 111 
F.T.C. 206, 309 (1988) (``The Commission presumes as material 
express claims and implied claims pertaining to a product's . . . 
cost.'' (citing Thompson Med. Co., Inc., 104 F.T.C. 648, 817 
(1984)).
---------------------------------------------------------------------------

    If consumers knew that the true terms were beyond what was 
expected, or their transaction included charges for unwanted items, 
that would likely affect their choice to visit a particular dealership 
over another dealership. Thus, misleading consumers about cost 
information is material. A lack of total payment information therefore 
is likely to affect a consumer's decision to purchase or lease a 
particular vehicle and is material, and paying an increased total cost 
causes substantial consumer injury.
    Thus, it is an unfair or deceptive act or practice for dealers to 
fail to disclose when making any representation about a monthly payment 
for any vehicle, the total amount the consumer will pay to purchase or 
lease the vehicle at that monthly payment after making all payments as 
scheduled, inclusive of assumed consideration. Further, this provision 
also addresses the misrepresentations prohibited by Sec.  463.3--
including misrepresentations regarding material information about the 
costs or terms of purchasing, financing, or leasing a vehicle--by 
requiring consumers to be provided with the total payment amount 
associated with any represented monthly payment amount. It also helps 
prevent dealers from failing to obtain the express, informed consent of 
the consumer for charges, as required by Sec.  463.5(c).\354\ To 
address these unfair or deceptive acts or practices, the Commission is 
requiring dealers to disclose, when making any representation about a 
monthly payment for any vehicle, the total amount the consumer will pay 
to purchase or lease the vehicle at that monthly payment after making 
all payments as scheduled, inclusive of assumed consideration. As with 
a vehicle's price, when cost information in the market is distorted or 
concealed--especially in document- and time-intensive vehicle 
transactions--consumers are unable to effectively differentiate between 
sellers, and sellers trying to deal honestly with consumers are put at 
a competitive disadvantage.
---------------------------------------------------------------------------

    \354\ See 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' unfair or 
deceptive acts or practices).
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    For the foregoing reasons, and having considered all of the 
comments that it received, the Commission is finalizing the required 
disclosure at Sec.  463.4(d) largely as proposed, with the minor 
modifications of capitalizing the defined term ``Vehicle,'' 
substituting a period for a semi-colon and the word ``and'' at the end 
of Sec.  463.4(d)(1), and clarifying that the requirements of Sec.  
463.4(d) also are ``prescribed for the purpose of preventing the unfair 
or deceptive acts or practices defined in this part, including those in 
Sec. Sec.  463.3(a) and 463.5(c).''
(e) Monthly Payments Comparison
    Proposed Sec.  463.4(e) required dealers, when making any 
comparison between payment options that includes discussion of a lower 
monthly payment, to disclose that the lower monthly payment will 
increase the total amount the consumer will pay to purchase or lease 
the vehicle, if true. For the reasons discussed in the following 
paragraphs, the Commission is finalizing the required disclosure at 
Sec.  463.4(e) largely as proposed. The Commission is capitalizing the 
defined term ``Vehicle'' to conform with the definition at Sec.  
463.2(e). The Commission also is adding language to the end of Sec.  
463.4(e) clarifying that the requirements in Sec.  463.4(e) ``also are 
prescribed for the purpose of preventing the unfair or deceptive acts 
or practices defined in this part, including those in Sec. Sec.  
463.3(a) and 463.5(c).''
    A number of institutional commenters supported such a provision, 
emphasizing that it would provide an appropriate amount of helpful 
information and help make the true terms of a car deal much clearer to 
consumers. Many individual commenters also stressed the need for the 
Commission's proposal:
    <bullet> My car buying experience involving dealers has include 
[sic] many of the issues identified, such as: . . . Negotiating a 4 
year loan with a known loan payment (did math prior to final steps). 
Presented paperwork with a similar but lesser monthly payment. Dealer 
had changed terms to 5 year loan without open disclosure. Happy to 
hear, ``the bank gave you a better rate, you got a smaller payment,'' 
almost didn't catch what they'd done.\355\
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    \355\ Individual commenter, Doc. No. FTC-2022-0046-0141.
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    <bullet> I have purchased about 10 new vehicles in my lifetime. . . 
. They prey on monthly payments as a tool, saying they can lower the 
monthly payment but not telling customers they added months or years to 
the term. Anything that forces them to be honest is a great justice for 
consumers! \356\
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    \356\ Individual commenter, Doc. No. FTC-2022-0046-0985.
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    <bullet> Sometimes, when you are in negotiations with a car dealer, 
they engage in deceptive practices by lowering your monthly payment 
amount without telling you how they lowered it. They may have increased 
your down payment or increased your interest rate or increased your 
term of the loan. This can lead [t]o much higher costs for the 
consumer. I had reached an agreement with a dealer to lower my monthly 
payments, but what they didn't tell me until I got into the F & I 
manager's office is that my deal [was] for 6 years, not 4, and they 
increased my interest rate.\357\
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    \357\ Individual commenter, Doc. No. FTC-2022-0046-1652.
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    <bullet> . . . I was quoted a payment at 72 months with adding 
aftermarket warranty but come to find out they extended my term to 76 
months in order to meet what I wanted to pay monthly. I did not find 
this out until after I bought the car. Very dishonest dealership. This 
last minute bait and switch has to stop.\358\
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    \358\ Individual commenter, Doc. No. FTC-2022-0046-7569.
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    <bullet> I purchased a truck from a Tennessee truck dealer. After 
agreeing on a monthly payment of $920 for 72 months, I travelled to the 
dealership to complete the purchase, but the finance office changed the 
terms to 84 months with the same monthly payment, effectively adding 
$11,000 to their profit! \359\
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    \359\ Individual commenter, Doc. No. FTC-2022-0046-0115.
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    <bullet> I just want to walk in to a dealership, find a car that 
fits my needs and buy it. And what is up with these RIDUCULOUSLY [sic] 
long loan terms? 72 MONTHS? If someone cannot afford a car dealers 
shouldn't extend the loan, they should steer them to a more affordable 
car! \360\
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    \360\ Individual commenter, Doc. No. FTC-2022-0046-0050.
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    The Commission received numerous comments relating to the scope and

[[Page 644]]

terms of its proposed monthly payments comparison disclosure. A number 
of institutional and individual commenters urged the Commission to 
require that such disclosures uniformly be provided to consumers in 
writing. The Commission agrees with commenters that many monthly 
payment comparisons happen verbally, in the course of discussions with 
consumers. As proposed, the Commission's monthly payment comparison 
disclosure made clear that such discussions are covered, and that 
dealers would be required to inform consumers in the course of such 
discussions--``[w]hen making any comparison between payment options''--
if a represented lower monthly payment will increase the total amount 
the consumer will pay to purchase or lease the vehicle. The Commission 
believes there are significant consumer benefits when such disclosures 
are made verbally, close in time to when monthly payment options are 
discussed. Given that car-buying and leasing transactions are already 
lengthy and paperwork-heavy, the Commission believes it must be 
judicious with any additional written disclosure requirements to avoid 
crowding out other disclosures or other important information. 
Accordingly, the Commission has determined not to modify Sec.  463.4(e) 
from its original proposal in order to mandate that the required 
disclosure always be made in writing. The Commission will continue to 
monitor the market for any further developments in this area and will 
consider whether to modify this or other Final Rule provisions in the 
future.
    Some commenters, including consumer advocacy organizations, urged 
the Commission to adopt specific proposed language rather than a 
general disclosure requirement, or a requirement that this disclosure 
include the total amount the consumer will pay at the lower monthly 
payment under discussion. Regarding the proposal to require particular, 
uniform disclosure language, the Commission did not receive, in the 
course of public comment, evidence sufficient to conclude that uniform 
formatting for the delivery of such disclosures would be necessary to 
make them effective. The Commission currently lacks information to 
evaluate whether any particular form disclosure would effectively 
communicate the required information to consumers in a manner that in 
all circumstances obviates deceptive or unfair conduct. Moreover, 
regarding the proposal to require that the monthly payment comparison 
disclosure additionally require dealers to disclose the new total 
amount that the consumer will pay, the Commission emphasizes that part 
463 will require such a disclosure without the need to modify this 
provision from the Commission's original proposal. As noted in the 
paragraph-by-paragraph analysis of Sec.  463.4(d) in SBP III.D.2(d), 
the Commission is finalizing Sec.  463.4(d), which requires dealers 
making any representation about a monthly payment for a vehicle to 
disclose the total amount the consumer will pay to purchase or lease 
the vehicle at a given monthly payment amount after making all payments 
as scheduled, inclusive of assumed consideration, largely as proposed. 
The monthly payment comparison discussions covered by Sec.  463.4(e) 
are those that ``include[] discussion of a lower monthly payment.'' To 
the extent a dealer, in the course of such discussions, makes a 
representation ``about a monthly payment for any Vehicle,'' Sec.  
463.4(d) will require the dealer to disclose the total amount the 
consumer will pay at that monthly payment amount.
    Comments, including those from a number of dealership associations 
\361\ and an individual commenter, characterized the Commission's 
proposal as burdensome and likely to lead to excessive disclosures 
while providing little additional assistance to consumers. In response, 
the Commission emphasizes the streamlined nature of proposed Sec.  
463.4(e). In its proposal, the Commission refrained from additional 
formal mandates in order to provide dealers with flexibility, within 
the bounds of the law, to provide this essential information--that a 
given lower monthly payment will increase the total amount the consumer 
will pay--including so that dealers already conveying this information 
in a non-deceptive manner may continue to do so.
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    \361\ As previously indicated, some such association commenters 
contended generally that the proposed total of payments disclosures 
at Sec.  463.4(d) and (e) overlapped with the Truth in Lending Act 
or other laws. The Commission responds to this point in the context 
of the discussion of Sec.  463.4(d), in SBP III.D.2(d).
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    Thus, after careful review of the comments, the Commission has 
determined to finalize Sec.  463.4(e) largely as proposed. When making 
any comparison between payment options, expressly or by implication, 
directly or indirectly, that includes discussion of a lower monthly 
payment, the failure to disclose that the lower monthly payment will 
increase the total amount the consumer will pay to purchase or lease 
the vehicle, if true, is likely to mislead consumers regarding the 
total terms associated with the lower monthly payment amount. When a 
dealer elects to compare between different monthly payment options, if 
the lower monthly payment would result in a higher total transaction 
cost, discussion of this fact is necessary to prevent the comparison 
from being misleading. Absent this information, it is reasonable for a 
consumer who is presented with a monthly payment comparison to expect 
that the lower monthly payment amount would correspond to lower total 
transaction cost. This is because the opposite can only be true if the 
dealer has created a so-called ``apples to oranges'' comparison, in 
which an undisclosed element of the transaction--such as the length of 
the payment term, or the existence of a balloon payment--has not been 
kept constant across the two monthly payment scenarios being compared. 
Under such circumstances, without providing the consumer with further 
information, the dealer's claims regarding monthly payment amounts 
falsely imply saving or parity between different offers where reduced 
monthly payments increase the total vehicle cost. Thus, where a lower 
monthly payment amount represents a more expensive transaction, the 
dealer must, at a minimum, disclose this simple but counterintuitive 
fact to not deceive consumers.\362\
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    \362\ Depending on the circumstances, a dealer may need to take 
additional measures, such as disclosing the specific basis for any 
increase in total costs, or amount of any such increase, in order to 
avoid deceiving consumers.
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    Furthermore, as explained in the NPRM and in the paragraph-by-
paragraph discussion of Sec.  463.4(d) in SBP III.D.2(d), cost is one 
of the most material pieces of information for a consumer in making an 
informed purchasing decision.\363\
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    \363\ See, e.g., Fed. Trade Comm'n v. Windward Mktg., Inc., No. 
Civ.A. 1:96-CV-615F, 1997 WL 33642380, at *10 (N.D. Ga. Sept. 30, 
1997) (``[A]ny representations concerning the price of a product or 
service are presumptively material.''); Removatron Int'l Corp., 111 
F.T.C. 206, 309 (1988) (``The Commission presumes as material 
express claims and implied claims pertaining to a product's . . . 
cost.'' (citing Thompson Med. Co., Inc., 104 F.T.C. 648, 817 
(1984)); see also Fed. Trade Comm'n v. Crescent Pub. Grp., Inc., 129 
F. Supp. 2d 311, 321 (S.D.N.Y. 2001) (``Information concerning 
prices or charges for goods or services is material, as it is 
`likely to affect a consumer's choice of or conduct regarding a 
product.' '').
---------------------------------------------------------------------------

    Regarding unfairness, when making any comparison between payment 
options, expressly or by implication, directly or indirectly, that 
includes discussion of a lower monthly payment, the failure to disclose 
that the lower monthly payment will increase the total

[[Page 645]]

amount the consumer will pay to purchase or lease the vehicle, if true, 
is likely to cause substantial injury to consumers who waste time and 
effort pursuing offers that are not actually available at the total 
payment amount they expect; or who pay more for a vehicle sales or 
lease transaction than they expected by being subject to hidden charges 
or an unexpected down payment or trade-in requirement; or who are 
subject to the higher financing costs and greater risk of default 
associated with an unexpectedly lengthy loan term.
    Furthermore, the injury caused by withholding this information is 
not reasonably avoidable by consumers. During negotiations, if dealers 
agree to a lower monthly payment, consumers have no reason to expect 
that this apparent ``concession'' in fact means an increased total 
vehicle cost due to an increased payment term or annual percentage 
rate. Under such circumstances, dealers can also add unwanted, 
undisclosed, or even fictitious add-on charges more easily, by 
increasing the payment term enough that including add-on charges would 
still result in a lower monthly payment as a ``concession'' to the 
consumer. The injury to consumers from a lack of price information is 
not outweighed by any benefits to consumers or competition from 
withholding this basic information. Instead, information about 
increased cost protects consumers from lost time and effort, and 
unexpected charges while increasing competition among dealers, who 
would be able to compete on truthful, standard terms. The costs of 
stating that the total payment has increased--which the dealer 
determines and can calculate upfront--are minimal for dealers that are 
already making representations about a monthly payment for a vehicle, 
especially when compared to the injury to consumers.
    Thus, it is an unfair or deceptive act or practice for dealers to 
fail to disclose, when making any comparison between payment options, 
expressly or by implication, directly or indirectly, that includes 
discussion of a lower monthly payment, that the lower monthly payment 
will increase the total amount the consumer will pay to purchase or 
lease the vehicle, if true. Further, this provision also serves to 
prevent the misrepresentations prohibited by Sec.  463.3--including 
misrepresentations regarding material information about the costs or 
terms of purchasing, financing, or leasing a vehicle--by requiring 
consumers to be given accurate information that the total payment will 
increase when presented with a lower monthly payment. It also helps 
prevent dealers from failing to obtain the express, informed consent of 
the consumer for charges, as addressed by Sec.  463.5(c), including 
charges relating to the financing or lease of a vehicle.\364\ Thus, the 
Commission is requiring dealers to disclose, when making any comparison 
between payment options, expressly or by implication, directly or 
indirectly, that includes discussion of a lower monthly payment, that 
the lower monthly payment will increase the total amount the consumer 
will pay to purchase or lease the vehicle, if true. As with a vehicle's 
price, when cost information in the market is distorted or concealed--
especially in document- and time-intensive vehicle transactions--
consumers are unable to effectively differentiate between sellers, and 
sellers trying to deal honestly with consumers are put at a competitive 
disadvantage.
---------------------------------------------------------------------------

    \364\ See 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' unfair or 
deceptive acts or practices).
---------------------------------------------------------------------------

    For the foregoing reasons, and having considered all of the 
comments that it received on this proposed provision, the Commission is 
finalizing the required disclosure at Sec.  463.4(e) largely as 
proposed, with the minor modifications of capitalizing the defined term 
``Vehicle'' additional language clarifying that the requirements in 
Sec.  463.4(e) ``also are prescribed for the purpose of preventing the 
unfair or deceptive acts or practices defined in this part, including 
those in Sec. Sec.  463.3(a) and 463.5(c).''

E. Sec.  463.5: Dealer Charges for Add-Ons and Other Items

1. Overview
    Proposed Sec.  463.5 prohibited motor vehicle dealers from charging 
for add-on products or services from which the consumer would not 
benefit; from charging consumers for undisclosed or unselected add-ons 
unless certain requirements were met; and from charging for any item 
unless the dealer obtains the express, informed consent of the consumer 
for the item.
    In response to the NPRM, various stakeholder groups and individuals 
submitted comments regarding these proposed provisions. Among these 
were comments in favor of the provisions; comments that urged the 
Commission to include additional restrictions on add-on charges; and 
comments questioning or recommending against the proposed provisions.
    After careful consideration of the comments, the Commission has 
determined to finalize Sec.  463.5(a) and (c) without substantive 
modification and has determined not to finalize Sec.  463.5(b) 
regarding undisclosed or unselected add-ons. The Commission also is 
making minor textual edits to the introductory language in Sec.  463.5 
for clarity and consistency: substituting ``Federal Trade Commission 
Act'' for ``FTC Act''; adding ``Covered'' to ``Motor Vehicle Dealer'' 
to conform with the defined term at Sec.  463.2(f) (`` `Covered Motor 
Vehicle Dealer' or `Dealer' ''), and capitalizing ``Vehicles'' to 
conform with the defined term at Sec.  463.2(e) (`` `Covered Motor 
Vehicle' or `Vehicle' '').
    In the following analysis, the Commission examines each proposed 
provision in Sec.  463.5; the substantive comments relating to each 
provision; responses to these comments; and the Commission's final 
determination with regard to each proposed provision.
2. Paragraph-by-Paragraph Analysis of Sec.  463.5
(a) Add-Ons That Provide No Benefit
    Section 463.5(a) of the proposed rule prohibited motor vehicle 
dealers from charging for add-ons if the consumer would not benefit 
from such an add-on, including a pair of enumerated examples. For the 
following reasons, the Commission is finalizing this provision largely 
as proposed, with modifications to correct a misplaced hyphen; add the 
word ``that'' before ``are duplicative of warranty coverage''; and 
capitalize the defined term ``Vehicle'' to conform with the revised 
definition at Sec.  463.2(e). The Commission also is adding language to 
the end of Sec.  463.5(a), at newly designated (a)(3), clarifying that 
the requirements in Sec.  463.5(a) ``also are prescribed for the 
purpose of preventing the unfair or deceptive acts or practices defined 
in this part, including those in Sec.  463.3(a) and (b) and paragraph 
(c) of this section.'' Relatedly, the Commission is finalizing the 
definition of the term ``GAP Agreement,'' which is referenced in this 
provision and defined in Sec.  463.2(h) of the Final Rule, 
substantively as proposed, with minor modifications to correct a 
misplaced period, substitute ``Vehicle'' for both ``vehicle'' and 
``motor vehicle'' to conform with the revised definition at Sec.  
463.2(e), and remove an extraneous term--``insured's''--without 
changing the definition's operation.
    Many commenters, including a number of industry participants and 
associations, stated that products that provide no benefit to the 
consumer should not be sold in connection with the sale or financing of 
vehicles. Many commenters that supported the

[[Page 646]]

provision stated, inter alia, that the examples the Commission 
enumerated in this paragraph were obvious \365\ and particularly 
helpful for less-experienced buyers who may be led to believe that a 
particular product or service would be beneficial.\366\ Some individual 
commenters, for instance, noted that they had no way to confirm whether 
the ``nitrogen-filled'' tires they purchased with their vehicle 
actually had more nitrogen than naturally exists in the air, even 
though they were told the purchase of this service was mandatory.\367\ 
At least one individual commenter described requesting to see the 
nitrogen tank after such a purchase and being denied by the dealer.
---------------------------------------------------------------------------

    \365\ See, e.g., Individual commenter, Doc. No. FTC-2022-0046-
1608 at 6.
    \366\ See, e.g., Comment of 18 State Att'ys Gen., Doc No. FTC-
2022-0046-8062 at 9.
    \367\ See, e.g., Individual commenter, Doc. No. FTC-2022-0046-
0565.
---------------------------------------------------------------------------

    Examples of public comments about add-ons include the following:
    <bullet> I would argue that this does not go far enough but it [is] 
a good start. As someone who is trying to purchase a new vehicle, there 
is a[n] endless supply of ``perk packages'' or ``Family deals'' that I 
``must purchase'' if I would like to acquire a car from a dealer. These 
include a variety of dubious products such as insurance policies that 
pay out $3,500 if your car is stolen (and can't be found) in the first 
90 days of ownership, if your car is totaled by your insurance company 
in the first 90 days they'll pay $3,500. Nitrogen in the tires (A $196 
value). Vin Etching on the windows, plastic stickers on the door 
handles to prevent scratches. These items are a requirement to bundle 
with the vehicle and a deal that provides ``over $7,000 in value'' for 
$2,995. These tricks ignore the obvious, such as your car can not be 
both stolen (unrecovered) AND totaled so it's impossible to collect on 
both policies so the cumulative ``value'' of this package is 
overstated.\368\
---------------------------------------------------------------------------

    \368\ Individual commenter, No. FTC-2002-0046-0565.
---------------------------------------------------------------------------

    <bullet> One of the latest scams is to force you to buy a $1,000 
gps unit so they can recover the car if you miss payments. This 
shouldn't be allowed.\369\
---------------------------------------------------------------------------

    \369\ Individual commenter, No. FTC-2002-0046-4552.
---------------------------------------------------------------------------

    <bullet> Second vehicle I purchased had a $1,650 ``protection pkg'' 
plus the usual nitrogen in the tires BS. This time I asked to be shown 
the nitrogen tank they fill the tires with, they refused saying due to 
insurance rules customers aren't allowed in the shop. I asked them to 
take off the paint and fabric protection charge also, they declined at 
first until I reminded them they just got the vehicle the night before 
and there was still plastic factory coverings on the seats and strips 
of plastic on the vehicles body protecting certain areas. This time 
they mumbled some excuse about the addendum added to the price is put 
on the vehicle as soon as it arrives and they hadn't had ``time'' to 
apply all the overpriced add[-]ons.\370\
---------------------------------------------------------------------------

    \370\ Individual commenter, Doc. No. FTC-2022-0046-0854.
---------------------------------------------------------------------------

    <bullet> I'm a former carsalesperson [sic]. . . . Dealers should be 
banned from selling . . . special paints to protect from rust . . . . 
No coatings are added.\371\
---------------------------------------------------------------------------

    \371\ Individual commenter, Doc. No. FTC-2022-0046-1393.
---------------------------------------------------------------------------

    <bullet> I worked at a Dodge/Ram dealership for three years at the 
make ready (carwash) department. When new vehicles arrived their tires 
were rarely deflated and then filled with nitrogen. It is my 
understanding that the manufacture initially paid for the nitrogen fill 
and the customer was later charged.\372\
---------------------------------------------------------------------------

    \372\ Individual commenter, Doc. No. FTC-2022-0046-5493.
---------------------------------------------------------------------------

    <bullet> [O]ne of my previous purchases almost ended . . . with GAP 
that was so unnecessary, the lender called us a few days later after we 
already had the car and told us we'd be experiencing a lower monthly 
payment unless we wanted the price of the product back in a check 
because of the price we negotiated and the sizable down payment, it was 
impossible for GAP to ever be required.\373\
---------------------------------------------------------------------------

    \373\ Individual commenter, Doc. No. FTC-2022-0046-6816.
---------------------------------------------------------------------------

    A number of individual commenters indicated they did not consider 
nitrogen tires a valuable purchase and expressed no desire to purchase 
them. Many commented that, when they informed their respective dealers 
that they did not want these add-ons, the dealers would represent, 
inter alia, that nitrogen tires were required by law, that their 
insurance premium would increase without the add-on, that new foreign 
vehicles coming into the country must have nitrogen-filled tires under 
the law, or that the consumer needed to purchase nitrogen tires to meet 
fuel economy standards.
    Other commenters supported this proposed provision while also 
recommending that the Commission broaden its scope to prohibit the sale 
of add-on products or services that provide only ``minimal'' benefit to 
consumers.\374\ One such commenter, for instance, suggested the 
provision be expanded to prohibit dealers from charging for an add-on 
unless it provides a ``substantial, material benefit'' to 
consumers.\375\ Another commenter contended that there are a number of 
add-ons not meeting such standards being sold in connection with the 
sale or financing of vehicles, including future servicing packages for 
vehicle tune-ups and oil changes that are sold to remote or out-of-
State consumers who are exceedingly unlikely to return to the 
dealership for such services; tracking devices that are used almost 
exclusively for electronic repossession; and ``vendor's single 
interest'' or ``VSI'' insurance, which protects the financing entity, 
but not the consumer, in the event that the vehicle is damaged or 
destroyed.\376\
---------------------------------------------------------------------------

    \374\ See, e.g., Legal Aid Just. Ctr., Doc. No. FTC-2022-0046-
7833 at 3.
    \375\ Comment of Legal Action Chi., Doc. No. FTC-2022-0046-8097 
at 10.
    \376\ See also Consumer Fin. Prot. Bureau, ``What Is Vendor's 
Single Interest (VSI) insurance? '' (Aug. 16, 2016), https://www.consumerfinance.gov/ask-cfpb/what-is-vendors-single-interest-vsi-insurance-en-731/.
---------------------------------------------------------------------------

    The Commission acknowledges the considerable consumer harm that 
results from the sale of such add-ons and notes that several provisions 
in the Rule it is finalizing will address misconduct related to these 
and other add-ons, including many of the practices described by those 
commenters recommending further action. For example, to the extent that 
dealers make misrepresentations about any benefit of an add-on, such 
conduct would violate Sec.  463.3(b) of the Final Rule. Thus, were a 
dealer, for instance, to promote the sale of an add-on--such as a 
tracking device that is used almost exclusively for electronic 
repossession--based on its supposed benefit to the consumer, when the 
product primarily benefits another party, such conduct would violate 
the Rule even if the product otherwise provides an ancillary or 
marginal benefit to consumers. And if the add-on provided no benefit to 
the consumer and only a benefit to another party, Sec.  463.5(a) would 
prohibit the dealer from charging the consumer for it. Further, to the 
extent that dealers charge for add-ons without express, informed 
consumer consent for the charge, such conduct would violate Sec.  
463.5(c).
    The Commission recognizes that there may be significant consumer 
benefits from implementing additional restrictions on the sale of add-
on products or services. However, without additional information on 
costs and benefits to consumers or competition associated with such 
restrictions, the Commission has determined not to implement such 
restrictions in this Final Rule. The Commission will continue to 
monitor the motor vehicle

[[Page 647]]

marketplace to gather additional information on this issue and will 
consider whether to modify or expand Sec.  463.5(a) in the future, 
including on the basis of stakeholder experience with this provision 
and whether it effectively addresses unlawful conduct.
    Commenters also urged the Commission to adopt a number of 
additional measures regarding the sale of such add-ons. A consumer 
advocacy organization, for instance, proposed that the Commission 
require dealers to list coverage limitations for add-ons that may 
overlap with a vehicle's warranty coverage, observing that consumers 
commonly are not aware of important limitations until the add-on, such 
as a warranty or service contract, is needed, and only then does the 
consumer learn the add-on does not provide the anticipated benefits. A 
State consumer protection agency recommended that the Commission 
require affirmative disclosures for the sale of add-ons that may 
provide only ``nominal'' benefit, offering a list of what they 
characterized as such products for the Commission to consider in 
conjunction with this recommendation.
    In response, the Commission notes that other provisions in part 463 
address misconduct relating to these issues, including by prohibiting 
misrepresentations regarding material information about add-ons, by 
requiring disclosures about optional add-ons, and by requiring dealers 
to obtain the express, informed consent of the consumer for add-on 
charges. Thus, misrepresenting the coverage limitations of an add-on; 
making representations regarding an optional add-on without disclosing 
that it is not required and that the consumer can purchase or lease the 
vehicle without the add-on; and charging for an add-on under false 
pretenses or without the consumer's express, informed consent would 
violate other provisions the Commission is finalizing. The Commission 
is concerned that requiring additional disclosures may have the effect 
of reducing the saliency of key information in what is already a 
lengthy, paperwork-heavy transaction. Accordingly, the Commission has 
determined not to adopt additional such disclosure measures in this 
Final Rule.
    In addition, at least one consumer protection agency commenter 
asked the Commission to consider deeming it an unfair or deceptive act 
or practice to sell any add-on product for a price greater than the 
value of the product itself. The Commission declines to restrict the 
sale of add-on products at a price higher than the value of the product 
itself, absent additional information, including information regarding 
the costs and benefits to consumers and competition of such a 
restriction.\377\
---------------------------------------------------------------------------

    \377\ One consumer attorney commenter requested that the 
Commission clarify that warranty disclaimers are not a valid defense 
to common law fraud and statutory consumer fraud, and that, if fraud 
is proven, warranty disclaimers are not an allowable defense to UCC 
actions. In response, the Commission notes that none of the 
provisions the Commission is finalizing state that warranty 
disclaimers are a defense to common law fraud or in UCC actions.
---------------------------------------------------------------------------

    A number of industry association commenters claimed the provision 
was vague and requested the Commission set forth how to calculate the 
loan-to-value (``LTV'') ratio at which a GAP agreement would be non-
beneficial, given that there could be fluctuation of the vehicle value 
in the future. Some suggested that the Commission adopt a presumption 
or safe harbor that dealers complying with an LTV calculation set by 
the Commission be deemed in compliance with the portion of the proposal 
related to GAP agreements.
    Other industry association commenters argued against adopting a set 
LTV ratio as the basis for determining whether a consumer would benefit 
from a GAP agreement, claiming that the vehicle financing entity is 
best positioned to determine whether such an add-on would be 
beneficial. Relatedly, some industry association commenters contended 
that certain GAP agreements sold on a low-LTV loan, or that limit 
benefits based on a consumer's LTV ratio, could still provide 
additional benefits.
    A financing association commenter contended that any final rule 
should not create rules around the calculation of the LTV ratio. 
Another financing group proposed that the Commission require dealers to 
provide disclosures that would inform consumers of any potential value 
gap between a vehicle's purchase price and its appraised value.
    With regard to establishing LTV ratio parameters for the sale of 
GAP agreements, without further information from commenters regarding 
the costs and benefits of establishing a particular LTV ratio as the 
basis for determining whether a consumer would benefit from a GAP 
agreement, or a particular method for calculating the LTV ratio, and 
given the Commission's previously stated information saliency concerns 
about finalizing additional disclosures in an already lengthy 
transaction, the Commission has determined not to establish in this 
Final Rule a particular numeric threshold or calculation regarding the 
sale of GAP agreements to consumers, or to require additional 
associated disclosures. Regarding the benefits of certain GAP 
agreements, this provision restricts sales of GAP agreements where the 
consumer would not benefit. If there are benefits to the consumer, 
dealers must abide by other provisions in the Final Rule, including the 
requirements that the dealer represents the extent of those benefits 
accurately (Sec.  463.3(b)) and obtains express, informed consent from 
the consumer for the charges for this item (Sec.  463.5(c)).
    The Commission also received some industry association comments 
claiming that each State imposes differing requirements as to coverage, 
disclosures, exceptions, and product terms of GAP agreements. One such 
commenter asked for guidance on how a bright-line, State-law rule on 
LTV ratios would interact with the FTC's proposal. Another such 
commenter requested the FTC reconcile different State-law approaches to 
the sale of GAP agreements, particularly regarding how this proposed 
provision would interact with a State law that, according to the 
commenter, only requires a dealer to have a reasonable belief that the 
customer may be eligible for a benefit. In response, the Final Rule 
does not disturb State law unless it is inconsistent with part 463, and 
then only to the extent of the inconsistency. Where, for example, State 
laws restrict the sale of GAP agreements if the LTV ratio for the 
transaction is below a certain threshold, or require that dealers have 
a ``reasonable belief'' that the GAP agreement would benefit the 
consumer, dealers in that State can, and must, comply with the State 
law and with the Rule. Pursuant to such State law, dealers would be 
prohibited from selling the product if the LTV ratio is below the 
established threshold or if they do not reasonably believe the GAP 
agreement would benefit the consumer and, pursuant to the Final Rule, 
if the LTV ratio would result in the consumer not benefitting 
financially. To the extent there is an actual conflict between the 
Commission's Final Rule and a State law--and the Commission is 
skeptical that there is such a State law that explicitly allows for the 
sale of a product that does not benefit the consumer--the Commission 
refers commenters to Sec.  463.9, which sets forth the Rule's relation 
to State laws.
    With respect to the proposed definition of ``GAP Agreement,'' an 
industry association commenter contended that the phrase ``the actual 
cash value of the insured's vehicle in the event of an unrecovered 
theft or total loss'' meant the value of the vehicle at some point in 
the future, and asserted that future vehicle values cannot be 
accurately determined at the

[[Page 648]]

time of sale. The proposed definition, however, did not prescribe how 
dealers must calculate a vehicle's cash value; rather, it explains that 
the term ``GAP Agreement'' means an agreement to indemnify a vehicle 
purchaser for any difference between such value, however determined, in 
the event of an unrecovered theft or total loss, and the amount owed, 
regardless of what that difference may be. Upon examination of this 
phrase, however, the Commission has determined to remove the term 
``insured's'' because it is extraneous and does not affect the 
operation of this definition: with or without the term, the phrase 
describes the manner in which a qualifying GAP agreement determines the 
amount to indemnify a vehicle purchaser or lessee. In context in this 
definition, it is clear without the term ``insured's'' that the 
applicable ``Vehicle'' is the one covered by the GAP agreement. 
Omitting this unnecessary term thus avoids confusion without 
substantively changing this definition.
    One industry association commenter argued that reference to ``GAP 
insurance'' should be removed from the definition of ``GAP Agreement'' 
because of the McCarran-Ferguson Act's reverse-preemption of certain 
Federal laws that ``invalidate, impair, or supersede'' State laws 
enacted ``for the purpose of regulating the business of insurance.'' 
\378\ As previously discussed with regard to the definition of ``Add-
on,'' however, commenters have provided no evidence that the proposed 
or Final Rule would invalidate, impair, or supersede State laws enacted 
for the purpose of regulating insurance. Rather than affecting any 
State's regulation of insurance, the Final Rule prohibits dealers from 
making misrepresentations regarding add-ons, from failing to disclose 
when add-ons are not required, and from charging for add-ons that 
provide no benefit or for which the consumer has not provided express, 
informed consent. The Commission therefore finalizes the definition of 
``GAP Agreement'' largely as proposed in its NPRM with minor 
modifications to correct a misplaced period, substitute ``Vehicle'' for 
both ``vehicle'' and ``motor vehicle'' to conform with the revised 
definition at Sec.  463.2(e), and remove an extraneous term--
``insured's''--without changing the definition's operation.
---------------------------------------------------------------------------

    \378\ 15 U.S.C. 1012(b).
---------------------------------------------------------------------------

    While acknowledging that products or services that provide no 
benefit to consumers should not be sold, commenters including an 
industry association also argued that the Commission's proposed 
provision was vague and required more research. Some industry 
association commenters expressed concern regarding how the Commission 
would determine whether an item would not benefit the consumer. In 
response, the Commission provides the following information. Proposed 
Sec.  463.5(a) included enumerated examples of add-ons from which 
consumers would not benefit: (1) nitrogen-filled tires that contain no 
more nitrogen than normally found in the air, and (2) products or 
services that do not provide coverage for the vehicle, the consumer, or 
the transaction, or are duplicative of warranty coverage for the 
vehicle, including a GAP agreement if the consumer's vehicle or 
neighborhood is excluded from coverage or the LTV ratio would result in 
the consumer not benefitting financially.\379\ As these examples 
illustrate, determining that a consumer would not benefit from an add-
on involves analyzing objective standards under the circumstances, such 
as whether the add-on provides benefits; whether the consumer is 
eligible to use the add-on; whether the add-on's coverage excludes the 
vehicle at issue; and whether the add-on is incompatible with the 
vehicle at issue. Thus, additional examples of add-ons that would be 
prohibited by this provision include the following: purported rust-
proofing add-ons that do not actually prevent rust; purported theft-
prevention or theft-deterrent add-ons that do not prevent or deter 
theft; and add-ons that the vehicle itself cannot support, including 
engine oil-change services for a vehicle, such as an electric vehicle, 
that does not use engine oil, or software or audio subscription 
services for a vehicle that cannot support the software or utilize the 
subscription.\380\
---------------------------------------------------------------------------

    \379\ See Consumer Fin. Prot. Bureau, ``Supervisory Highlights: 
Issue 19, Summer 2019'' 3-4 (Sept. 2019), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-19_092019.pdf (finding instances in which auto 
lenders sold ``a GAP product to consumers whose low LTV meant that 
they would not benefit from the product'').
    \380\ See, e.g., Shannon Osaka, ``Electric vehicles are hitting 
a road block: Car dealers,'' Wash. Post (Nov. 9, 2023), https://www.washingtonpost.com/climate-solutions/2023/11/09/car-dealerships-ev-sales (describing a dealership salesperson offering an electric 
vehicle-buyer a plan for oil changes and an extended warranty for a 
gas-powered car); see also Consumer Fin. Prot. Bureau, ``Supervisory 
Highlights: Issue 24, Summer 2021'' 3-4 (June 2021), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-24_2021-06.pdf (finding servicers added and 
maintained unnecessary collateral protection insurance (CPI) when 
consumers had adequate insurance and thus the CPI provided no 
benefit to the consumers, and also when consumers' vehicles had been 
repossessed even though no actual insurance protection was provided 
after repossession).
---------------------------------------------------------------------------

    One association commenter argued that the phrase ``nitrogen-filled 
tire related-products or services that contain no more nitrogen than 
naturally exists in the air'' in proposed Sec.  463.5(a)(1) would 
create a standard with which it may be impossible to comply because 
``no individual set of tires could have a higher total quantity of 
nitrogen than that in `the air' that stretches around the planet.'' 
\381\ This commenter requested that the Commission clarify to avoid 
this possible reading. Here, the Commission notes that the phrase does 
not prohibit such tires if they do not contain a ``higher total 
quantity of nitrogen than that in the air''; instead, charging for a 
nitrogen-filled tire would fail by this standard if it contains ``no 
more nitrogen than'' the proportion that ``naturally exists in the 
air.''
---------------------------------------------------------------------------

    \381\ Comment of Competitive Enter. Inst., Doc. No. FTC-2022-
0046-7670 at 6.
---------------------------------------------------------------------------

    One industry association commenter requested more explanation from 
the Commission regarding what would be considered ``duplicative of 
warranty coverage'' under proposed Sec.  463.5(a)(2), while another 
contended that vehicle service contracts that overlap with a 
manufacturer's warranty may still provide additional, beneficial 
coverage, such as after the manufacturer's warranty expires. In 
response, the Commission notes that this provision prohibits the sale 
of warranties that are duplicative. A dealer may offer a warranty add-
on that has some overlap in coverage with existing warranty coverage 
for the vehicle, but the add-on must provide additional protection. 
Moreover, other provisions of the Final Rule address misconduct 
relating to warranties, including by prohibiting misrepresentations 
regarding material information about any costs, limitation, benefit, or 
any other aspect of the warranty product or service. For example, under 
the Final Rule, a dealer may not mislead a consumer as to the benefits 
or conditions of the warranty, including amount or length of coverage 
(Sec.  463.3(b)). In addition, under Sec.  463.5(c), the dealer must 
obtain the express, informed consent of the consumer for the charge for 
the warranty (Sec.  463.5(c)).
    Other commenters, including an industry association, asserted that 
this proposed provision would cause dealers to stop offering beneficial 
products or services. The Commission notes that its proposal did not 
require such a result and emphasizes that this provision would prevent 
charges to consumers for products or services that provide them

[[Page 649]]

no benefit. To the extent that a prohibition against charging consumers 
for items that provide no benefit to the consumer may cause some 
dealers to discontinue offering beneficial products, consumers would be 
free to instead visit other dealerships or to seek the same or similar 
offerings from other providers. Dealers, of course, continue to be free 
under the Final Rule to offer beneficial add-ons to consumers--
consistent with existing law and with other provisions of this Rule.
    Some commenters, including industry associations and a dealership 
association, raised concerns about compliance administrability for this 
proposed provision in the case of products attached to a vehicle by 
manufacturers that may provide no benefit, questioning whether, if this 
proposal went into effect, dealers would be prohibited from charging 
for such products. In response, the Commission refers commenters to the 
definition of ``Add-on'' or ``Add-on Product(s) or Service(s)'' in 
Sec.  463.2(a). Notably, ``Add-on'' is defined, in relevant part, as 
any ``product(s) or service(s) not provided to the consumer or 
installed on the Vehicle by the Vehicle manufacturer . . .'' Thus, if 
an add-on product or service is installed on the vehicle by the motor 
vehicle manufacturer, it falls outside the scope of this definition, 
and concomitantly, outside the scope of the provision at Sec.  
463.5(a). Nonetheless, other provisions in the Final Rule address 
misconduct relating to this issue. For instance, as examined in 
additional detail in the discussion of Sec.  463.4, in SBP III.D, the 
offering price for the vehicle would be required to incorporate the 
charges for any such items if the dealer requires the consumer to pay 
for them. In addition, as described in additional detail in the 
discussion of Sec.  463.5(c), in SBP III.E.2(c), a dealer may not 
charge for any such item unless the dealer obtains the express, 
informed consent of the consumer for the charge.
    Another industry association commenter incorrectly stated that this 
provision was beyond the FTC's authority and correctly noted that the 
Commission has the authority to see that products are marketed and 
advertised fairly and honestly. As the commenter acknowledged, the 
Commission has the authority to address unfair and deceptive conduct; 
that is precisely what this provision does. Dealerships charging 
consumers for add-ons from which the consumers would not benefit is 
both a deceptive and unfair act or practice in violation of the FTC 
Act, as discussed in the following paragraphs. To address this 
deception or unfairness, the Commission is finalizing this provision 
with minor modifications, including one to correct a typographical 
error in the placement of a hyphen in a phrase in proposed Sec.  
463.5(a)(1). In the NPRM, the relevant phrase appeared as, ``(1) 
Nitrogen-filled tire related-products or services''; in the Final Rule, 
the corrected phrase will now read as follows: ``(1) Nitrogen-filled 
tire-related products or services.'' For clarity, the Commission is 
also adding the word ``that'' before ``are duplicative of warranty 
coverage;'' capitalizing the defined term ``Vehicle'' to conform with 
the revised definition at Sec.  463.2(e); and adding language 
clarifying that the requirements of Sec.  463.5(a) also are 
``prescribed for the purpose of preventing the unfair or deceptive acts 
or practices defined in this part, including those in Sec.  463.3(a) 
and (b) and paragraph (c) of this section.''
    Dealerships charging consumers for add-ons from which the consumers 
would not benefit involves deceptive conduct. When a dealer charges 
consumers for add-ons that would not benefit the consumers, the dealer 
either (1) discusses the add-on charges or (2) is silent about these 
items. In the first scenario, if a dealer discusses add-on charges, 
consumers typically would not agree to pay such charges for additional 
products from which they could not benefit unless they are led to 
believe, directly or by omission, that these products would in fact be 
beneficial to them. Thus, the dealer would be misleading consumers, 
even in the event the dealer subsequently provides a disclaimer 
indicating the add-on would not benefit the consumer.\382\ In the 
second scenario, it is reasonable for consumers to believe that the 
terms they have agreed to are what was negotiated, and do not include 
additional charges for optional, undisclosed items--particularly items 
that would not benefit the consumer. If a dealer charges consumers for 
such items under such circumstances, the dealer is misleading the 
consumer. Misleading consumers about cost information is material.\383\ 
If consumers knew that a dealership was charging them for items from 
which they would not benefit, such knowledge likely would affect their 
commercial choices, including whether to continue with, or ultimately 
consummate, the vehicle sale or financing transaction.\384\
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    \382\ Removatron Int'l Corp. v. Fed. Trade Comm'n, 884 F. 2d 
1489, 1497 (1st Cir. 1989) (``Disclaimers or qualifications . . . 
are not adequate to avoid liability unless they are sufficiently 
prominent and unambiguous to change the apparent meaning of the 
claims and to leave an accurate impression. Anything less is only 
likely to cause confusion by creating contradictory double 
meanings.'').
    \383\ See, e.g., Fed. Trade Comm'n v. Windward Mktg., Ltd., No. 
Civ.A. 1:96-CV-615F, 1997 WL 33642380, at *10 (N.D. Ga. Sept. 30, 
1997) (``[A]ny representations concerning the price of a product or 
service are presumptively material.''); Removatron Int'l Corp., 111 
F.T.C. 206, 309 (1988) (``The Commission presumes as material 
express claims and implied claims pertaining to a product's . . . 
cost.'' (citing Thompson Med. Co., Inc., 104 F.T.C. 648, 817 
(1984)); see also Fed. Trade Comm'n v. Crescent Pub. Grp., Inc., 129 
F. Supp. 2d 311, 321 (S.D.N.Y. 2001) (``Information concerning 
prices or charges for goods or services is material, as it is 
`likely to affect a consumer's choice of or conduct regarding a 
product.' '').
    \384\ Even under a hypothetical scenario wherein a consumer 
understood an add-on would not benefit them but wanted to pay extra 
for the add-on anyway, in the case of an act or practice challenged 
by the agency as deceptive or unfair, ``the FTC need not prove that 
every consumer was injured. The existence of some satisfied 
customers does not constitute a defense . . . .'' Fed. Trade Comm'n 
v. Amy Travel Serv., Inc., 875 F.2d 564, 572 (7th Cir. 1989), 
vacated in part on other grounds, Fed. Trade Comm'n v. Credit Bureau 
Ctr., LLC, 937 F.3d 764 (7th Cir. 2019); accord Fed. Trade Comm'n v. 
Stefanchik, 559 F.3d 924, 929 n.12 (9th Cir. 2009).
---------------------------------------------------------------------------

    Such charges are also unfair. When charges for any add-on accompany 
the already lengthy and complex car-buying process, it is difficult to 
obtain consent that is truly express and informed.\385\ Rather than 
prohibiting all such charges or taking other measures, as specifically 
contemplated in the NPRM,\386\ however, this provision focuses on 
charges for add-ons that would not benefit the consumer. Charges for 
add-ons that would not benefit the consumer can cost consumers 
thousands of dollars and significantly increase the overall cost to the 
consumer in the transaction, including by increasing the amount 
financed and total of payments, thereby increasing the risk the 
consumer will ultimately default on repayment

[[Page 650]]

obligations.\387\ This injury is not reasonably avoidable by consumers 
when dealers are silent about such charges and simply include them in 
dense, lengthy contracts, as explained in detail in SBP II.B.2.\388\ If 
a dealer instead describes what the charges are for, such a description 
either deceptively states or implies that the add-on would benefit the 
consumer, or acknowledges the add-on would not benefit the consumer, 
the latter of which would create ``contradictory double meanings'' 
\389\ and, if discovered, would still result in the dealer wasting the 
consumers' time.\390\ Further, there are no benefits to consumers or to 
competition from charging consumers for add-ons that would not benefit 
them. Moreover, charging for non-beneficial products is inconsistent 
with industry guidance,\391\ and dealerships that profit from such 
sales place dealerships that do not at a competitive disadvantage. 
Thus, it is an unfair or deceptive act or practice for dealers, in 
connection with the sale or financing of vehicles, to charge for an 
add-on product or service if the consumer would not benefit from such 
an add-on product or service. This provision also serves to prevent 
misrepresentations prohibited by Sec.  463.3 of the Final Rule, 
including misrepresentations regarding material information about the 
costs or terms of purchasing, financing, or leasing a vehicle, and 
about any costs, limitation, benefit, or other aspect of an add-on. 
This provision further helps prevent dealers from failing to obtain 
express, informed consent for charges, as prohibited by Sec.  
463.5(c).\392\
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    \385\ See, e.g., Consumer Fin. Prot. Bureau, ``Supervisory 
Highlights: Issue 19, Summer 2019'' 3-4 (Sept. 2019), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-19_092019.pdf (describing findings, from 
supervisory examinations, of lenders selling GAP agreements to 
consumers whose low LTV meant that they would not benefit from the 
product: ``By purchasing a product they would not benefit from, 
consumers demonstrated that they lacked an understanding of a 
material aspect of the product. The lenders had sufficient 
information to know that these consumers would not benefit from the 
product. These sales show that the lenders took unreasonable 
advantage of the consumers' lack of understanding of the material 
risks, costs, or conditions of the product.'').
    \386\ See, e.g., NPRM at 42030 (Question 33) (``In particular, 
the Commission is contemplating whether any final Rule should 
restrict dealers from selling add-ons (other than those already 
installed on the vehicle) in the same transaction, or on the same 
day, the vehicle is sold or leased.''); id. (Question 38) 
(discussing proposed Sec.  463.5(c) and asking ``Does the proposal 
provide a meaningful way to obtain consent in an already disclosure-
heavy transaction? If it would result in too many disclosures, what 
other measures could be taken to protect consumers from unauthorized 
charges? '').
    \387\ See, e.g., Complaint ]] 25-28, Fed. Trade Comm'n v. N. Am. 
Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022).
    \388\ See, e.g., Auto Buyer Study, supra note 25, at 13-15, 17-
18.
    \389\ See Removatron Int'l Corp. v. Fed. Trade Comm'n, 884 F. 2d 
1489, 1497 (1st Cir. 1989) (``Disclaimers or qualifications . . . 
are not adequate to avoid liability unless they are sufficiently 
prominent and unambiguous to change the apparent meaning of the 
claims and to leave an accurate impression. Anything less is only 
likely to cause confusion by creating contradictory double 
meanings.'').
    \390\ Even in the hypothetical scenario where some consumers 
could have avoided the injury because they understood that an add-on 
would not benefit them but wanted to pay extra for the add-on 
anyway, the dealer's conduct in selling non-beneficial add-ons would 
still be unfair because it substantially injures other consumers who 
do not wish to pay for items that would not benefit them and, as 
discussed in the SBP text, cannot reasonably avoid the harm, and no 
countervailing benefits outweigh the costs. See FTC v. Amazon.com, 
Inc., 2016 U.S. Dist. LEXIS 55569, *15, *18-21 (W.D. Wash. Apr. 26, 
2016) (finding unfairness even though some consumers could have 
avoided the charge). Additionally, consumers who truly wish to 
purchase add-ons that do not benefit them may still be able to do so 
directly from the add-on provider.
    \391\ See Nat'l Auto. Dealers Ass'n et al., ``Voluntary 
Protection Products: A Model Dealership Policy'' 5 (2019), https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy (explaining that when determining which 
voluntary protection products to offer to customers, ``the 
dealership should have confidence in the value that the product 
offers to customers,'' including that the dealership should 
understand ``whether its coverage is already provided by another 
product being purchased by the customer,'' and stating ``[i]t is 
essential that customers have a clearly defined path to receiving 
such benefits.'').
    \392\ See 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' unfair or 
deceptive acts or practices).
---------------------------------------------------------------------------

(b) Undisclosed or Unselected Add-Ons
    The Commission's proposed provisions relating to undisclosed or 
unselected add-on products or services, at Sec.  463.5(b), prohibited 
dealers from charging for optional add-ons before undertaking certain 
measures. Specifically, proposed Sec.  463.5(b)(1) prohibited dealers 
from charging for optional add-ons unless the dealers disclosed, and 
offered to consummate the transaction for, the cash price at which a 
consumer may purchase the vehicle without such add-ons. This proposed 
provision also required the consumer to decline to purchase the vehicle 
for the cash price without the add-on by means of a written 
declination, with date and time recorded, and signed by the consumer 
and a manager of the motor vehicle dealer. The proposed requirements of 
Sec.  463.5(b)(1) applied before the dealer referenced any aspect of 
financing for a specific vehicle, aside from the offering price, or 
before consummating a non-financed sale. Proposed Sec.  463.5(b)(2) 
required similar steps before charging for any optional add-on in a 
financed transaction, including that the dealer disclose, and offer to 
consummate the transaction for, a vehicle's cash price without optional 
add-ons plus the finance charge for such transaction, separately 
itemizing the components of the offer. This proposed provision also 
required a written, dated, time-stamped, and signed declination. 
Finally, proposed Sec.  463.5(b)(3) required dealers to disclose the 
cost of the transaction, whether financed or not, without any optional 
add-ons, as well as the charges for the optional add-ons selected by 
the consumer, separately itemized. Each proposed provision required 
clear and conspicuous disclosure of specific information relating to 
optional add-ons and their associated costs.
    As discussed in the following paragraphs, the Commission has 
determined not to finalize the proposed provisions at Sec.  463.5(b) 
regarding undisclosed or unselected add-ons. Many commenters described 
the likely benefits of such proposed provisions, and a number of 
commenters indicated how such provisions would be feasible, including 
by reference to similar disclosure regimes already in effect at the 
State or local level. Commenters also credited the Commission's goals 
for such provisions.
    However, other commenters opposed these proposed provisions, 
contending they would be burdensome and time-consuming. Others 
similarly expressed concern that, given the duration, complexity, and 
paperwork-heavy nature of motor vehicle sales and financing 
transactions, these provisions would not effectively resolve the 
problem of add-ons being sold without express, informed consumer 
consent.\393\
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    \393\ See, e.g., Comment of Nat'l Consumer L. Ctr. et al., Doc. 
No. FTC-2022-0046-7607 at 30-31. Instead, advocates recommended that 
the Commission require a cooling-off period for add-ons, similar to 
that required by the Commission for door-to-door and other off-
premises sales, which would grant consumers time to review the 
paperwork after the transaction, and to cancel unexpected or 
otherwise unwanted add-ons for a full refund. Id. This comment is 
addressed when discussing Sec.  463.5(c) in SBP III.E.2(c).
---------------------------------------------------------------------------

    Having considered the comments, the Commission declines to include 
in this Final Rule the proposed provisions relating to undisclosed or 
unselected add-on products or services at Sec.  463.5(b). The 
Commission notes that various commenters were concerned about the 
extent to which this proposal would add documents and time to the 
transaction. If finalized, this would have been the sole provision in 
the Final Rule that affirmatively requires the dealer and consumer, in 
all circumstances, to view and sign additional documentation during the 
purchase, finance, or lease process, in what is already a document-
heavy, time-consuming, and complicated transaction. The Commission 
further notes that, as a matter of existing law, dealers are already 
prohibited from engaging in misrepresentations regarding add-ons and 
from charging for add-ons without express, informed consent--conduct 
which the Final Rule prohibits as well. Accordingly, the Commission has 
determined not to include this provision in its Final Rule.
    The Commission will continue to monitor the motor vehicle 
marketplace for issues pertaining to unselected or undisclosed add-ons, 
and will consider implementing additional measures in the future if it 
determines such measures are necessary to address deceptive or unfair 
practices relating to add-ons.

[[Page 651]]

(c) Any Item Without Express, Informed Consent
    Section 463.5(c) of the proposed rule prohibited motor vehicle 
dealers, in connection with the sale or financing of vehicles, from 
charging consumers for any item unless the dealer obtains the express, 
informed consent of the consumer for the charge. Upon careful review 
and consideration of the comments, the Commission is finalizing this 
provision with one modification from its original proposal: the 
addition of language to the end of Sec.  463.5(c) clarifying that the 
requirements in Sec.  463.5(c) ``also are prescribed for the purpose of 
preventing the unfair or deceptive acts or practices defined in this 
part, including those in Sec. Sec.  463.3(a) and (b), 463.4, and 
paragraph (a) of this section.'' In addition, the Commission is 
finalizing the corresponding definition of ``Express, Informed 
Consent,'' now at Sec.  463.2(g).
    Many commenters favored the proposed provision and expressed the 
need for such a provision. For example:
    <bullet> In one instance a salesman who appeared busy and trying to 
help me efficiently navigate the process rushed me to sign a small 
paper, ``just sign this quickly and we'll be on our way,'' I was told, 
without disclosure that they were selling me something that I did not 
want. I found it later and felt cheated.\394\
---------------------------------------------------------------------------

    \394\ Individual commenter, Doc. No. FTC-2022-0046-0794.
---------------------------------------------------------------------------

    <bullet> They made me sign the sales bill on an electronic device, 
but the finance guy never pointed to me any number I was getting 
charge[d] for, and never pointed to me the total amount I was getting 
billed for. He seem[ed] to be in a hurry and he even told me he had 
people waiting for him to see. I think it was all planned to push the 
buyer to blindly sign the bill of sale without explaining anything 
because he was scrolling the electronic pages in a hurry and going 
straight to the sign box line. I thought I signed the agreed amount, I 
trust them, but, instead, they charge me for things I never agreed on. 
I went back to the dealer in less than 48 hours when I discovered the 
fraud and asked them to remove the extra fees they charged me for, they 
refused and they forced me to pay for it, I asked them and requested 
them to take the car back, they refused it again, at the end, they gave 
me a little bit of a discount, but, not compared to what I got charged 
for. . . .\395\
---------------------------------------------------------------------------

    \395\ Individual commenter, Doc. No. FTC-2022-0046-0671.
---------------------------------------------------------------------------

    <bullet> I am an attorney in private practice in NY representing 
consumers for 33 years. It never ceases to amaze me how car dealers 
defraud honest trusting consumers substantial sums of money through 
various common deceptive and fraudulent practices ranging from altering 
documents, concealing documents, having consumers sign blank documents, 
lying about the material terms of the deal, altering the prices, adding 
on other contracts or items never discussed and selling vehicles with 
undisclosed damages and defects.\396\
---------------------------------------------------------------------------

    \396\ Individual commenter, Doc. No. FTC-2022-0046-0073.
---------------------------------------------------------------------------

    <bullet> I have worked in the automotive business for many year[s]. 
I realize there are plenty of dealers around the US that have deceptive 
business practices, however this isn't the case for all dealers. I 
believe there can be laws that can be put in place to help prevent 
dealers from adding additional backend products without consent or 
knowledge.\397\
---------------------------------------------------------------------------

    \397\ Individual commenter, Doc. No. FTC-2022-0046-9917.
---------------------------------------------------------------------------

    Others supported the proposed provision and urged the Commission to 
include additional measures, such as a thirty-day ``cooling-off'' 
period within which consumers would be able to receive a full refund 
for any add-ons. A number of commenters, including consumer advocacy 
organizations, contended that such an additional time frame to review, 
and potentially cancel, any add-ons would counter the high-pressure, 
confusing environment of the dealership F&I office and undermine any 
efforts to misrepresent add-on charges and coverage. Such commenters 
also indicated that such a provision would allow consumers the 
opportunity to compare prices and providers, and ultimately help 
increase competition in the marketplace. A few individual commenters 
requested that the Commission provide a cooling-off period not only for 
add-ons, but for the full vehicle purchase, and a prohibition on 
charging non-refundable deposits.
    The Commission agrees that a ``cooling off'' provision could offer 
consumers additional protection from unwanted add-ons; however, 
additional information would assist the Commission in evaluating the 
potential benefits of such a provision. Such information might include, 
for example, what length a cooling-off period would need to be in order 
to offer adequate protection to consumers and to competition, or how 
consumers would most effectively be made aware of such a cooling-off 
period in the course of the complicated, lengthy, and document-heavy 
vehicle sale or financing transaction. Such information would be 
particularly relevant given that, in the Commission's law enforcement 
experience, consumers have paid unauthorized charges on years-long 
contracts without learning of the charges.\398\ Accordingly, the 
Commission will continue to monitor the market to determine whether, 
after adoption of this Rule, it appears that a cooling-off period or 
other measures would be warranted.
---------------------------------------------------------------------------

    \398\ See discussion in SBP II.B.2.
---------------------------------------------------------------------------

    Other commenters, including consumer advocacy organizations, 
emphasized the importance of having disclosures and other documents 
available in the language used to negotiate the sale or lease. Here, 
the Commission notes that a dealer does not obtain the express, 
informed consent of the consumer if the consumer's assent to a charge 
is ambiguous or based on a disclosure the consumer does not easily 
understand.\399\ Thus, if a dealer uses one language during 
negotiations and a different language in its contracts, and the 
consumer does not understand and assent to the charges, the dealer is 
violating Sec.  463.5(c). Furthermore, the Commission notes that the 
definition of ``Express, Informed Consent'' it is finalizing at Sec.  
463.2(g) requires, inter alia, a clear and conspicuous disclosure of 
what the charge is for and the amount of the charge, and the 
Commission's definition of ``Clear(ly) and Conspicuous(ly),'' at Sec.  
463.2(d)(5), requires disclosures to appear ``in each language in which 
the representation that requires the disclosure appears.''
---------------------------------------------------------------------------

    \399\ See Sec.  463.2(g) (defining ``Express, Informed Consent'' 
to include an affirmative act communicating ``unambiguous assent to 
be charged''); Sec.  463.2(d) (defining ``Clear(ly) and 
Conspicuous(ly)'' to include a manner that is ``easily 
understandable'').
---------------------------------------------------------------------------

    Other commenters, including a consumer advocacy organization and a 
consumer protection agency, recommended the Commission prescribe 
additional requirements for obtaining express, informed consent for 
charges, such as boxes for signatures and date-and-time recordings, and 
a requirement that dealers comply with the E-Sign Act. Other commenters 
also discussed obtaining consent through electronic signatures. 
Commenters including consumer advocacy organizations, for instance, 
reported cases wherein documents that were signed and supposedly 
provided electronically to consumers, were never actually delivered to 
the consumer, or delivered days later. According to these commenters, 
some consumers would sign on a small signature pad where they could not 
see the terms of the document being signed. Other practitioner 
commenters reported that

[[Page 652]]

consumers' electronic signatures were applied to contracts with very 
different terms from what the consumers believed they were accepting. 
An individual commenter recommended that dealers be required to provide 
paper documents where requested and consumers be allowed to consent on 
paper documents only, noting that elderly consumers or those for whom 
English is a second language may have difficulty with electronic 
signatures. Another individual commenter expressed the view that anyone 
needing assistance understanding the sales price or disclosures should 
be provided independent legal counsel at the dealership's expense.
    While the Commission agrees that additional measures to promote 
express, informed consent could reduce the incidence of unauthorized 
charges and aid with enforcement efforts, the Commission has determined 
not to include in this Final Rule provisions that would require new 
forms during the vehicle sale or financing transaction. This way, law-
abiding dealers would not have to change their practices for obtaining 
express, informed consent. Thus, the Commission declines to add further 
requirements, including those involving signature boxes or date-and-
time recordings. Regarding the E-Sign Act, nothing in the Rule modifies 
compliance obligations under this Act. Instead, the Final Rule requires 
that, regardless of whether any given signature may have been obtained 
through electronic or other means, the dealer must obtain the express, 
informed consent of the consumer to any item for which the dealer 
charges the consumer. Furthermore, the Commission notes that a dealer 
has not obtained express, informed consent if a dealer has consumers 
sign an electronic keypad without seeing and understanding the terms, 
or applies their electronic signatures on contracts with terms 
different from those to which the consumer agreed.\400\ In such 
circumstances, the consumer has not demonstrated informed consent, or 
unambiguous assent to be charged, including because the signatures are 
not in close proximity to clear and conspicuous disclosures regarding 
the charges.
---------------------------------------------------------------------------

    \400\ See Sec.  463.2(g) (defining ``Express, Informed Consent'' 
to include requiring clear and conspicuous disclosures of what the 
charge is for and the amount of the charge).
---------------------------------------------------------------------------

    Other commenters, including industry and dealership associations, 
claimed that the Commission did not provide enough information 
regarding what would constitute express, informed consent to charges, 
contending that additional detail was needed, or that the provision and 
associated definition of ``Express, Informed Consent'' were too vague. 
The Commission notes, however, that the phrase ``Express, Informed 
Consent'' is consistent with existing legal standards.\401\ Commission 
enforcement actions over the years have challenged as deceptive or 
unfair the failure to get express, informed consent to charges, 
including in actions involving motor vehicle dealers and others:
---------------------------------------------------------------------------

    \401\ See, e.g., Fed. Trade Comm'n v. Amazon.com, Inc., 71 F. 
Supp. 3d 1158, 1163 (W.D. Wash. 2014).
---------------------------------------------------------------------------

    <bullet> Rushing consumers through stacks of auto paperwork more 
than 60 pages deep and requiring over a dozen signatures, where the 
paperwork included charges for unwanted add-ons.\402\
---------------------------------------------------------------------------

    \402\ Complaint ]] 24-25, 29-49, 76, Fed. Trade Comm'n v. North 
Am. Auto. Servs., Inc., No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022).
---------------------------------------------------------------------------

    <bullet> Double charging certain fees without consumers' knowledge 
or consent in highly technical documents presented at the close of a 
long financing process after an already lengthy process of selecting a 
vehicle and negotiating over its price.\403\
---------------------------------------------------------------------------

    \403\ Complaint ]] 17-19, 44, Fed. Trade Comm'n v. Liberty 
Chevrolet, No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020).
---------------------------------------------------------------------------

    <bullet> Presenting consumers with preprinted sales and financing 
forms that included add-ons consumers had not requested, and rushing 
consumers through the closing process while directing them where to 
sign forms, including forms that were blank.\404\
---------------------------------------------------------------------------

    \404\ Complaint ]] 59-64, 91, Fed. Trade Comm'n v. Universal 
City Nissan, No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016).
---------------------------------------------------------------------------

    <bullet> Charging consumers more for a product or service than they 
agreed to pay.\405\
---------------------------------------------------------------------------

    \405\ See, e.g., Complaint ]] 29, 47, Fed. Trade Comm'n v. 
Yellowstone Cap. LLC, No. 1:20-cv-06023-LAK (S.D.N.Y. Aug. 3, 2020).
---------------------------------------------------------------------------

    <bullet> Charging consumers for more products than they 
requested.\406\
---------------------------------------------------------------------------

    \406\ See, e.g., Complaint ]] 11-14, 21, Bionatrol Health, LLC, 
No. C-4733 (F.T.C. Mar. 5, 2021).
---------------------------------------------------------------------------

    <bullet> Cramming charges onto consumers' bills for services that 
the consumers did not request without the consumers' knowledge or 
consent.\407\
---------------------------------------------------------------------------

    \407\ See, e.g., Complaint ]] 8-9, 42, Fed. Trade Comm'n v. T-
Mobile USA, Inc., No. 2:14-cv-00967-JLR (W.D. Wash. July 1, 2014); 
Complaint ]] 9, 49, Fed. Trade Comm'n v. AT&T Mobility, LLC, No. 
1:14-cv-03227-HLM (N.D. Ga. Oct. 8, 2014).
---------------------------------------------------------------------------

    Courts have found the failure to obtain express, informed consent 
to be a violation of the FTC Act.\408\ Other statutes and rules 
enforced by the Commission include express, informed consent 
requirements for consumer purchases,\409\ and similar provisions have 
appeared in Commission orders resolving charges that motor vehicle 
dealers or other sellers have levied unauthorized charges on 
consumers.\410\ In short, the prohibition in Sec.  463.5(c) against 
charging consumers for products or services without their express, 
informed consent, and the corresponding definition of ``Express, 
Informed Consent'' in Sec.  463.2(g) are consistent with existing law 
in articulating what motor vehicle dealers must do--and already should 
be doing.
---------------------------------------------------------------------------

    \408\ See, e.g., Fed. Trade Comm'n v. FleetCor Techs., Inc., 620 
F. Supp. 3d 1268, 1333-38 (N.D. Ga. 2022); Fed. Trade Comm'n v. 
Amazon.com, Inc., No. C14-1038-JCC, 2016 WL 10654030, at *8 (W.D. 
Wash. July 22, 2016); Fed. Trade Comm'n v. Inc21.com Corp., 745 F. 
Supp. 2d 975, 1005 (N.D. Cal. 2010), aff'd, 475 F. App'x 106 (9th 
Cir. 2012).
    \409\ 15 U.S.C. 8402(a)(2), 8403(2) (Restore Online Shoppers' 
Confidence Act); 16 CFR 310.4(a)(7) (Telemarketing Sales Rule).
    \410\ The Commission has required express, informed consent 
provisions in orders against motor vehicle dealers and others. See 
Stipulated Order at Art. IV, Fed. Trade Comm'n v. Passport Auto. 
Grp., Inc., No. 8:22-cv-02670-TDC (D. Md. Oct. 18, 2022); Stipulated 
Order at Art. II, Fed. Trade Comm'n v. North Am. Auto. Servs., Inc., 
No. 1:22-cv-01690 (N.D. Ill. Mar. 31, 2022) Stipulated Order at Art. 
II, Fed. Trade Comm'n v. Liberty Chevrolet, No. 1:20-cv-03945 
(S.D.N.Y. May 22, 2020); Stipulated Order at Art. III, Fed. Trade 
Comm'n v. Consumer Portfolio Servs., No. 14-cv-00819 (C.D. Cal. June 
11, 2014). Similarly, the Commission has required such provisions in 
orders in other contexts. See, e.g., Stipulated Order at Art. III, 
Fed. Trade Comm'n v. Yellowstone Cap. LLC, No. 1:20-cv-06023-LAK 
(S.D.N.Y. May 4, 2021); Stipulated Order at Art. IV, Fed. Trade 
Comm'n v. Prog. Leasing, No. 1:20-cv-1668-JPB (N.D. Ga. Apr. 22, 
2020); Decision and Order at Art. VI, Bionatrol Health, LLC, No. C-
4733 (F.T.C. Mar. 5, 2021); Stipulated Order at Art. I.E, Fed. Trade 
Comm'n v. BunZai Media Grp., Inc., No. CV 15-4527-GW (PLAx) (C.D. 
Cal. June 27, 2018); Stipulated Order at Art. I, Fed. Trade Comm'n 
v. T-Mobile USA, Inc., No. 2:14-cv-00967-JLR (W.D. Wash. Dec. 19, 
2014); Stipulated Order at Art. I, Fed. Trade Comm'n v. AT&T 
Mobility, LLC, No. 1:14-cv-03227-HLM (N.D. Ga. Oct. 8, 2014); 
Decision and Order at Art. I, Google, Inc., No. C-4499 (F.T.C. Dec. 
2, 2014); Consent Order, Apple Inc., No. C-4444 (F.T.C. Mar. 27, 
2014); cf. Fed. Trade Comm'n v. Kennedy, 574 F. Supp. 2d 714, 720-21 
(S.D. Tex. 2008) (consumers charged without express, informed 
consent for web services could not reasonably avoid harm when told 
that websites were ``free'').
---------------------------------------------------------------------------

    The Commission further notes that the proposed definition of 
``Express, Informed Consent'' provided information regarding what was 
required by Sec.  463.5(c): an affirmative act by the consumer 
communicating unambiguous assent to be charged, made after receiving 
and in close proximity to a clear and conspicuous disclosure, in 
writing, and also orally for in-person transactions, of the following: 
(1) what the charge is for; and (2) the amount of the charge, 
including, if the charge is for a product or service, all fees and 
costs to be charged to the consumer over the period of repayment with 
and without the product or service. As is evident from this language, 
there

[[Page 653]]

must be an affirmative act that itself conveys the consumer's 
unambiguous assent to the specific charge: it must clearly and 
expressly communicate both that the consumer has been informed about 
the charge and consents to the charge. This act cannot be susceptible 
to alternative interpretations, i.e., that the consumer meant to 
communicate something other than the consumer's authorization to be 
charged for the specific add-on or other item in question. For example, 
a consumer might ask, ``how much would it cost to get the car with [a 
specific add-on]? '' Such a statement does not convey unambiguous 
assent to be charged for the mentioned add-on; rather, it could merely 
convey curiosity, interest, or a desire to evaluate options. Similarly, 
if a consumer responds to a salesperson's description of an add-on by 
saying ``OK,'' this response may merely confirm that the consumer had 
heard or understood information and does not indicate the consumer's 
unambiguous assent to purchase, let alone be charged for, such an item.
    Relatedly, some commenters, including dealership associations, 
suggested that the addition, by the consumer, of a signature or set of 
initials, accompanied by a corresponding date can be partial evidence 
of an affirmative, or ``Express,'' act. The Commission notes that the 
extent to which these, or other, acts indicate ``Express, Informed 
Consent'' depends on circumstances and context. A consumer signing a 
lengthy document with pre-checked boxes does not, by itself, 
demonstrate express, informed consent. This is particularly so at the 
end of an hours-long transaction, at which point actions that, under 
other circumstances, may indicate assent are increasingly less likely 
to do so unambiguously, given that at the close of a transaction, 
consumers expect to be finalizing previously agreed-upon terms instead 
of discussing new products or services hours into the deal. For 
express, informed consent to be effective, the consumer must understand 
what a charge is for and the amount of the charge, including all costs 
and fees over the length of the payment period. A signed and dated 
document would not satisfy the requirement for express, informed 
consent, for example, if the consumer was directed to sign the final 
page of a contract or an electronic signature pad and the signed and 
dated document did not reflect the terms to which the consumer had 
agreed. In such cases, the signed and dated document does not represent 
the consumer's unambiguous assent to be charged, made after receiving, 
and in close proximity to, a clear and conspicuous disclosure of what 
the charges are for and the amount of the charges.
    Some industry association commenters argued that the proposed 
definition was too prescriptive, and would require, for instance, video 
records to demonstrate compliance, or that the proposed language was 
overreaching, and requiring express, informed consent for every item on 
a contract would be complicated and time-consuming. The Commission 
notes again that, under current law, dealerships are already required 
to obtain consumers' express, informed consent to charges. If dealers 
are already obtaining such consent, as is required by law, they need 
not take additional steps, such as by using a separate disclosure form 
or videos, or by spending additional time during the transaction to 
comply with this provision.
    A dealership association commenter requested examples of 
recordkeeping and best practices evidencing oral disclosures that would 
satisfy the requirement to obtain express, informed consent. The 
express, informed consent requirement and definition require the 
disclosure to be made in writing in addition to orally for in-person 
transactions. Furthermore, under other provisions of the Rule, such as 
the definition of ``Clear(ly) and Conspicuous(ly)'' at Sec.  
463.2(d)(7), dealers are prohibited from contradicting information that 
is required to be disclosed; thus, for example, dealers' oral 
representations must be consistent with the written disclosure required 
for obtaining express, informed consent. Best practices for satisfying 
the requirement to obtain express, informed consent include presenting 
key information and finalizing actual terms early in the transaction--
for example, by including full cost information, such as estimated 
taxes, costs of any selections made by the consumer, and any other 
components of cost, on dealer websites--and maintaining records that 
this was done. The Commission notes that, as a transaction progresses, 
consumers expect to be finalizing previously agreed-upon terms instead 
of discussing new charges and new products or services. In lieu of 
finalizing additional formal mandates in the Rule regarding 
recordkeeping and best practices evidencing express, informed consent, 
the Commission recognizes that industry members and other stakeholders 
will have significant room to develop self-regulatory programs and 
guidance tailoring these and other topics to the specifics of their 
business operations.
    Some dealership association commenters expressed concern that such 
a provision would be inconsistent with State laws and would complicate 
the car buying experience. While the Commission is not aware of any 
laws that allow dealers to charge consumers without their express, 
informed consent, and thus is not aware of any inconsistences with this 
provision, Sec.  463.9 of the Final Rule specifies what dealers must do 
in the case of actual conflicts with State law. State laws may provide 
more or less specific requirements--including requirements that provide 
greater protection--as long as they do not conflict with the Final 
Rule, as set forth in Sec.  463.9. The Commission also notes that to 
the extent there is overlap with existing law, there is no evidence 
that duplicative prohibitions against deceptive and unfair conduct, 
including prohibitions against charging consumers without express, 
informed consent, have harmed consumers or competition.
    Commenters, including an industry association, inquired whether the 
term ``item,'' as used in this proposed provision, differed from the 
term ``Add-on Product or Service'' defined in Sec.  463.2 of the 
Commission's proposal. The industry association also argued that 
requiring express, informed consent is beyond what is required under 
the Truth in Lending Act. The Commission responds as follows: 
Consistent with its plain meaning, the term ``item'' is broader than, 
and thereby encompasses, the term ``Add-on Product(s) or Service(s),'' 
which is limited by its definition in Sec.  463.2 of the Final 
Rule.\411\ As proposed, Sec.  463.5 addressed ``Dealer Charges for Add-
ons and Other Items.'' \412\ It did so in recognition of the fact that 
add-ons are one type of ``item,'' but that ``Other Items'' for which a 
dealer might charge exist as well. Thus, as proposed, Sec.  463.5 
applied to charges generally, whether such charges were for an add-on 
or for another item. As previously discussed, charging consumers 
without their express, informed consent to the charge has long been an 
unfair or deceptive practice under the FTC Act. This has been the case 
regardless of what the charge is for. Accordingly, dealers already 
should be obtaining consumers' express, informed

[[Page 654]]

consent for charges, whether it is for an Add-on or any other item, 
regardless of what may be required under other laws.
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    \411\ See NPRM at 42046. The term ``item'' includes ``a distinct 
part in an enumeration, account, or series'' as well as ``a separate 
piece of news or information.'' See Item (defs. 1, 3), Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/item (last visited Sept. 14, 2023).
    \412\ See NPRM at 42046 (emphasis added).
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    Commenters, including this same industry association commenter, 
also questioned how a dealership would calculate ``the amount of the 
charge . . . with and without the product or service'' as would be 
required under proposed Sec.  463.2(g)(2), as well as how this proposed 
provision would work in a non-financed transaction.\413\ Conversely, an 
individual commenter stated that current F&I practices already 
routinely disclose the proposed charges with and without the product or 
service. The Commission notes that its proposed definition of 
``Express, Informed Consent'' plainly required disclosure of the 
``amount of the charge, including, if the product is for a product or 
service, all fees and costs to be charged to the consumer over the 
period of repayment with and without the product or service.'' \414\ 
The amount the dealer will charge the consumer over the period of 
repayment with the product or service is the total charge for that 
product or service. In the event the charge is for an optional product 
or service, the amount the dealer will charge the consumer without the 
product or service is zero; in the event the charge is for a non-
optional item, the dealer's disclosure must clearly indicate as such. 
Regarding non-financed transactions, as with a financed transaction, 
the amount the dealer will charge the consumer over the period of 
repayment with the product or service is the total charge for that 
product or service. If the period of repayment is such that full 
payment is due upon receipt of the vehicle, the amount required to be 
disclosed is the total charge for that product or service to be paid 
upon receipt of the vehicle. The amount the dealer will charge the 
consumer without the product or service, if it is optional, is zero; in 
the event the charge is for a non-optional item, the dealer's 
disclosure must clearly indicate such. Sharing this basic information 
with consumers--how much they will pay for the item and how much they 
will pay without it--addresses practices, such as hiding add-on 
charges, misrepresenting whether such charges are required in 
connection with the vehicle sale or financing transaction, or 
misrepresenting how such charges influence the total of payments for 
the transaction.
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    \413\ This commenter also contended that this provision would 
result in many disclosures when combined with proposed Sec.  
463.5(b). Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8368 at 98-99. As discussed previously, the Commission declines 
to finalize proposed Sec.  463.5(b).
    \414\ See NPRM at 42045.
---------------------------------------------------------------------------

    An industry association comment stated that, were the Commission's 
proposal to become final, the Commission would be able to obtain 
monetary relief from dealers for harmed consumers, and argued that 
Holder Rule protections for such consumers thus would be 
unnecessary.\415\ Accordingly, it urged the Commission to modify its 
proposal to include a safe harbor for contract assignees, which it 
argued would be incapable of detecting deficiencies in sale or lease 
transactions, such as dealer misrepresentations or a lack of consumer 
consent, unless those deficiencies were apparent from the face of the 
contract. Here, the Commission emphasizes that no provision of the 
Final Rule changes the status quo regarding the responsibilities of 
assignees or other subsequent holders of motor vehicle financing under 
the Holder Rule. The Commission did not include, when enacting the 
Holder Rule, a safe harbor from liability for claims or defenses based 
on their capability of detection by such assignees or other subsequent 
holders, and the Commission does not believe on the basis of comments 
received in the course of this rulemaking that such a change would be 
warranted as a consequence of finalizing this Rule. The Holder Rule 
provides important protections for harmed consumers, even when there is 
law that allows the Commission or other law enforcers to obtain 
remedies for harmed consumers, including where the consumers are 
seeking recourse from, or defending themselves against, parties that 
have not been the subject of law enforcement actions.\416\ Furthermore, 
while the Commission understands that dealers are often in the best 
position to ensure they have, in the first instance, obtained a 
consumer's express, informed consent for charges, there are steps an 
assignee or other subsequent holder of the consumer credit contract, 
such as a third-party financing entity, can take to address concerns 
about contracts obtained without express, informed consent. For 
example, if a financing entity receives complaints from consumers or 
others that specific charges were obtained without authorization or 
sees that charges for a particular item are occurring substantially 
more frequently at a given dealership than at others, the financing 
company can take steps to make sure the dealer is obtaining express, 
informed consent. Further, if a financing entity is concerned that a 
dealership may be acting in violation of the Final Rule, it may arrange 
its business relationships accordingly, including by altering or 
withdrawing its business from the dealership.\417\
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    \415\ See Holder Rule, 16 CFR 433.2.
    \416\ See Holder Rule, 16 CFR 433.2; see also Fed. Trade Comm'n, 
Advisory Opinion Regarding F.T.C. Trade Regulation Rule Concerning 
Preservation of Consumers' Claims and Defenses (May 3, 2012), 
https://www.ftc.gov/system/files/documents/advisory_opinions/16-c.f.r.part-433-federal-trade-commission-trade-regulation-rule-concerning-preservation-consumers-claims/120510advisoryopinionholderrule.pdf (last visited Dec. 5, 2023).
    \417\ See Complaint ]] 29-32, Fed. Trade Comm'n v. Tate's Auto 
Ctr. of Winslow, Inc., No. 3:18-cv-08176-DJH (D. Ariz. July 31, 
2018) (alleging a financing entity ceased business with Tate's Auto 
Center after concerns about loan falsification and substantial 
losses).
---------------------------------------------------------------------------

    Another industry association commenter asked for clarification 
regarding the extent to which particular rules are necessary to obtain 
customer authorization for charges, thus reflecting what is already 
necessary under State or Federal law, as opposed to preventative 
measures that the Commission otherwise deems necessary. The Commission 
notes that this provision is consistent with the requirements of the 
FTC Act, which already prohibits charging consumers without express, 
informed consent, and is needed to address unfair and deceptive 
conduct. As the Commission set forth in its NPRM, the length and 
complexity of motor vehicle transactions has created an environment 
rife with deceptive and unfair conduct. Consumer complaints and the 
Commission's extensive law enforcement experience, among other sources, 
indicate that some dealers have added thousands of dollars in 
unauthorized charges to motor vehicle transactions, including for add-
ons consumers had already rejected.\418\ Such issues are exacerbated 
when, for example, preprinted dealer contracts automatically include 
charges for optional add-ons that the consumer has not selected; when 
dealers rush consumers through stacks of paperwork with buried charges 
after a lengthy process; when dealers misinform consumers that the 
documents they are signing represent agreed-upon terms; or when dealers 
ask consumers to sign blank documents.
---------------------------------------------------------------------------

    \418\ See SBP II.B.2.
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    Charging consumers without their express, informed consent causes 
substantial injury to consumers in the amount of the unauthorized 
charge. This injury is not reasonably avoidable when dealers do not 
clearly and conspicuously disclose to the consumer what the charge is 
for and the amount of the charge, since this information is within the 
unilateral control of the

[[Page 655]]

dealer. There are no countervailing benefits to consumers or to 
competition that outweigh this injury. To the contrary, if all dealers 
obtained express, informed consent to charges, they would not lose 
business to dealers who do not do so.
    Charging for an item without obtaining the consumer's express, 
informed consent is also a deceptive practice under section 5 of the 
FTC Act.\419\ When a dealer presents a consumer with whom the dealer 
has negotiated a finalized sale or financing contract, the dealer is 
representing that the contract includes only charges that were 
negotiated and to which the consumer agreed. If the dealer failed to 
obtain the consumer's express, informed consent, however, such a 
representation is false or misleading. It is also material: if 
consumers knew that they had not, in fact, authorized a charge that the 
dealer nonetheless included in their sales or financing contract, this 
information likely would have affected the consumers' willingness to 
continue to engage with the dealership, as well as consumers' 
willingness to select and pay for any such item. The express, informed 
consent requirement also serves to prevent the misrepresentations 
prohibited by Sec.  463.3 of the Final Rule--including 
misrepresentations regarding material information about the costs or 
terms of purchasing, financing, or leasing a vehicle, and about any 
costs, limitation, benefit, or other aspect of an add-on.\420\ The 
requirement also serves to prevent violations of the disclosure 
requirements in Sec.  463.4 and the prohibition against charging for 
non-beneficial add-ons in Sec.  463.5(a). By operation of the 
definition of ``Express, Informed Consent'' at Sec.  463.2(g), this 
requirement reduces the likelihood that dealers will fail to disclose 
what a given charge is for and the amount of the charge including all 
fees and costs to be charged to the consumer over the period of 
repayment with and without the charged item, thereby making the 
disclosures of information required by Sec.  463.4 more likely. The 
same is true regarding the requirements of Sec.  463.5(a): the 
requirement that dealers obtain informed and unambiguous assent to be 
charged for each product or service makes it less likely that dealers 
will charge consumers for items from which they would not benefit; 
consumers typically do not provide informed, unambiguous assent to be 
charged for additional products from which they could not benefit 
unless they are led to believe, directly or by omission, that these 
products would be beneficial.
---------------------------------------------------------------------------

    \419\ See, e.g., Fed. Trade Comm'n v. FleetCor Techs., Inc., 620 
F. Supp. 3d 1268, 1334-39 (N.D. Ga. Aug. 9, 2022); Fed. Trade Comm'n 
v. Inc21.com Corp., 745 F. Supp. 2d 975, 1001-03 (N.D. Cal. Sept. 
21, 2010).
    \420\ See 15 U.S.C. 57a(a)(1)(B) (the Commission ``may include 
requirements prescribed for the purpose of preventing'' unfair or 
deceptive acts or practices).
---------------------------------------------------------------------------

    Thus, the Commission has determined to finalize proposed Sec.  
463.5(c), prohibiting dealers from charging a consumer for any item 
unless the dealer obtains the express, informed consent of the consumer 
for the charge, with the addition of language clarifying that the 
requirements in Sec.  463.5(c) ``also are prescribed for the purpose of 
preventing the unfair or deceptive acts or practices defined in this 
part, including those in Sec. Sec.  463.3(a) and (b), 463.4, and 
paragraph (a) of this section.'' In addition, the Commission has 
determined to finalize its definition of ``Express, Informed Consent,'' 
now at Sec.  463.2(g), substantively as proposed.

F. Sec.  463.6: Recordkeeping

    Proposed Sec.  463.6 required motor vehicle dealers to create and 
retain, for a period of twenty-four months from the date the record is 
created, all records necessary to demonstrate compliance with the Final 
Rule, including those in five enumerated paragraphs. This proposed 
section further provided that dealers may retain such records in any 
legible form, and in the same manner, format, or place as they may 
already keep such records in the ordinary course of business, and that 
failure to keep all required records required will be a violation of 
the Rule. As examined in additional detail in the following analysis, 
several commenters supported the proposal; several urged the Commission 
to adopt broader recordkeeping requirements; and several other 
commenters argued that the proposed requirements were too broad. After 
careful consideration, the Commission has determined to adopt these 
recordkeeping requirements largely as proposed, with two conforming 
modifications to remove references to proposed provisions not adopted 
in the Final Rule; one typographical modification to include a serial 
comma for consistency; and minor textual changes to ensure consistency 
with the defined terms at Sec.  463.2(e) and (f) by replacing ``Motor 
Vehicle Dealer'' with ``Covered Motor Vehicle Dealer'' or ``Dealer,'' 
replacing ``Motor Vehicle'' with ``Vehicle,'' and capitalizing 
``vehicle.'' In the following paragraphs, the Commission discusses each 
proposed recordkeeping requirement, the comments the Commission 
received on each such requirement as well as the Commission's responses 
to such comments, and the provisions the Commission is finalizing.
    Section 463.6(a) of the proposed rule required motor vehicle 
dealers to create and retain, for a period of twenty-four months from 
the date the record is created, all records necessary to demonstrate 
compliance with the Final Rule, including (1) copies of materially 
different advertisements, sales scripts, training materials, and 
marketing materials regarding the price, financing, or lease of a motor 
vehicle that the dealer disseminated during the relevant time period; 
(2) copies of all materially different add-on lists and all documents 
describing such products or services that are offered to consumers; (3) 
copies of all purchase orders; financing and lease documents with the 
dealer signed by the consumer, whether or not final approval is 
received for a financing or lease transaction; and all written 
communications relating to sales, financing, or leasing between the 
dealer and any consumer who signs a purchase order or financing or 
lease contract with the dealer; (4) records demonstrating that add-ons 
in consumers' contracts meet the requirements of Sec.  463.5, including 
copies of all service contracts, GAP agreements, and calculations of 
loan-to-value ratios in contracts including GAP agreements; and (5) 
copies of all written consumer complaints relating to sales, financing, 
or leasing, inquiries related to add-ons, and inquiries and responses 
about vehicles referenced in Sec.  463.4.
    Proposed Sec.  463.6(b) provided that a motor vehicle dealer may 
keep the required records ``in any legible form, and in the same 
manner, format, or place as they may already keep such records in the 
ordinary course of business.'' This proposed paragraph also specified 
that failure to keep all records required under paragraph (a) of this 
section would be a violation of the Final Rule.
    Many commenters, including State regulators, legal aid groups, 
consumer advocacy organizations, and individual commenters, endorsed 
the Commission's proposed rule generally, without criticism of its 
proposed recordkeeping requirements. In addition, one such association 
commenter expressly stated that it supported each of the proposed 
recordkeeping provisions, explaining that these proposed provisions 
were needed to address ``bait and switch'' tactics, provide evidence of 
whether required disclosures are made, and identify consumers harmed by 
illegal

[[Page 656]]

practices.\421\ Here, the Commission notes that record retention 
requirements are necessary to preserve written materials that reflect 
the transactions between the dealer and purchasing consumers, and to 
assist the Commission to enforce its Rule by enabling it to ascertain 
whether dealers are complying with its requirements; to identify 
persons who are involved in any challenged practices; and to identify 
consumers who may have been injured. Such requirements are particularly 
important in the case of complicated, lengthy, and document-heavy 
vehicle sale or financing transactions, in which law violations may be 
more difficult for consumers and others to detect. Indeed, the 
Commission routinely includes recordkeeping requirements in its 
rules.\422\
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    \421\ Comment of Nat'l Consumer L. Ctr. et al., Doc. No. FTC-
2022-0046-7607 at 48-49; see also Comment of N.Y.C. Dep't of 
Consumer and Worker Prot., Doc. No. FTC-2022-0046-7564 at 6 (noting 
retention requirements are vital to investigations, particularly 
with respect to mandatory disclosures).
    \422\ See, e.g., Telemarketing Sales Rule, 16 CFR 310.5; 
Business Opportunity Rule, 16 CFR 437.7.
---------------------------------------------------------------------------

    Several commenters, including consumer advocacy organizations, 
consumer protection agencies, a group of State attorneys general, and 
individual commenters, urged the Commission to consider expanding the 
proposed twenty-four-month record retention period, noting that the 
contract period for most retail installment contracts is much longer 
than twenty-four months, and that State limitations periods for claims 
relating to the subject matter of the Commission's proposed rule often 
extend well beyond this proposed timeframe. Numerous such commenters, 
for instance, recommended a record retention period of the longer of 
seven years or the length of the consumer's financing contract.
    The Commission understands that there would be benefits to a longer 
period, especially given that vehicle financing repayment terms are 
often far longer than twenty-four months, and that many dealers likely 
already maintain, in the ordinary course of business, the types of 
records set forth in proposed Sec.  463.6. The Commission, however, is 
also mindful that other commenters raised concerns about the costs 
associated with record retention, including costs that would increase 
with any extension of the retention period. Rather than limiting the 
types of records to be maintained, and thus hampering the Commission's 
ability to ensure compliance with the Final Rule, the Commission has 
determined to adopt a retention period that is shorter than the time 
period of many motor vehicle financing contracts, in order to minimize 
burdens. In the event the Commission subsequently determines that a 
twenty-four-month retention period is insufficient to ensure compliance 
with this Rule, the Commission may consider other measures in the 
future.
    In addition, a number of commenters, including consumer advocacy 
organizations, recommended additional provisions, including an explicit 
requirement to retain language-translated versions of required records, 
and a requirement to make retained records available to consumers upon 
request. Regarding language-translated versions of required records, 
Sec.  463.6(a)(3), (a)(4), and (a)(5) require dealers to retain copies 
of ``all'' listed records, while Sec.  463.6(a)(1) mandates that 
dealers retain ``Materially different'' copies of records. Thus, for 
the records listed in Sec.  463.6(a)(3), (a)(4), and (a)(5), any 
translations are required to be retained; in the case of Sec.  
463.4(a)(1), the Rule requires materially different translations to be 
maintained.\423\ The Commission therefore has determined not to add to 
the recordkeeping section of the Rule a standalone requirement to 
retain translated versions. The Commission will continue to monitor the 
marketplace to determine whether additional action or protections are 
warranted.
---------------------------------------------------------------------------

    \423\ See Sec.  463.2(j).
---------------------------------------------------------------------------

    The Commission also declines to include in this Final Rule an 
additional requirement that dealers provide retained records to 
consumers upon request. Such a requirement may be beneficial; however, 
it is not clear to what extent dealers currently refuse to provide 
consumers with such records, and there is insufficient information in 
the rulemaking record to assess the impact of--or need for--such a 
modification of the existing requirement to retain and preserve 
materials in the Rule. The Commission will continue to monitor the 
motor vehicle marketplace, including issues relating to information 
access, to determine whether additional action or protections are 
warranted.
    Other commenters--particularly auto industry participants--objected 
to the proposed recordkeeping requirements.\424\ Several such 
commenters contended that the proposed requirements were new 
obligations that went beyond specific State recordkeeping requirements. 
Some dealership associations argued that existing State recordkeeping 
requirements are sufficient and that a Commission rule was unnecessary. 
One such commenter argued that the existence of overlapping, but 
different, State and Federal standards may make compliance difficult 
for motor vehicle dealers.
---------------------------------------------------------------------------

    \424\ One industry commentor questioned the utility of records 
in FTC actions. This commenter also stated that the FTC is not a 
supervisory agency and thus should not be seeking to create a 
records inspection scheme. As noted previously, recordkeeping 
requirements are necessary here to prevent unfair and deceptive 
practices by mandating preservation of written materials that 
reflect dealer transactions and to enable effective enforcement of 
the Rule. The Commission has the authority to prescribe rules for 
the purpose of preventing unfair or deceptive acts or practices. See 
15 U.S.C. 57a(a)(1)(B). The Commission routinely includes 
recordkeeping requirements in rules, see, e.g., Telemarketing Sales 
Rule, 16 CFR 310.5; Business Opportunity Rule, 16 CFR 437.7, and 
courts have ordered companies to maintain records in FTC orders, 
see, e.g., Final Judgment at 20-21, Fed. Trade Comm'n v. Elegant 
Sols., Inc., No. 8:19-cv-01333-JVS-KES (C.D. Cal., July 17, 2020); 
Order for Permanent Injunction and Monetary Judgment at 27-28, Fed. 
Trade Comm'n. v. Consumer Defense, LLC, No. 2:18-cv-00030-JCM-BNW 
(D. Nev. Dec. 5, 2019).
---------------------------------------------------------------------------

    In response, the Commission notes that the recordkeeping 
requirement is necessary to ensure motor vehicle dealer compliance with 
the Final Rule, and therefore may have different requirements than 
State standards. To provide dealers with flexibility and to minimize 
burden, however, the proposed rule permitted dealers to retain records 
``in any legible form,'' including ``the same manner, format, or 
place'' in which records are kept in the ordinary course of business. 
To the extent dealers have fashioned their ordinary record retention 
practices around State recordkeeping standards, the proposed rule thus 
allowed for record retention in the form required by State 
recordkeeping standards. Additionally, as discussed in the following 
paragraphs, the Commission is not finalizing recordkeeping requirements 
that dealers maintain Add-on Lists and Cash Price without Optional Add-
ons disclosures and declinations, further reducing burdens.
    One industry association commenter suggested that this requirement 
would increase risks of identity theft and raise privacy concerns. The 
Commission notes that many dealers already have obligations to retain 
customer records under State law.\425\ Dealers are required to have 
systems in place to protect this information, given that the failure to 
adequately protect such information violates existing law, including 
section 5 of the FTC Act and the Commission's Standards for 
Safeguarding Customer Information, also known as the

[[Page 657]]

Safeguards Rule.\426\ Thus, to the extent the Final Rule requires 
dealers to collect personal information beyond that which they are 
already collecting, they should already have systems in place to 
protect such information.
---------------------------------------------------------------------------

    \425\ See, e.g., Va. Code sec. 46.2-1529 (requiring retention 
for five years of ``all dealer records'' regarding, among other 
things, vehicle purchases, sales, trades, and transfers of 
ownership).
    \426\ 15 U.S.C. 45; 16 CFR 314; see also Decision and Order, 
LightYear Dealer Techs., LLC, No. C-4687 (F.T.C. Sept. 3, 2019) 
(consent order); FTC Business Guidance, ``FTC Safeguards Rule: What 
Your Business Needs to Know,'' https://www.ftc.gov/business-guidance/resources/ftc-safeguards-rule-what-your-business-needs-know 
(last visited Dec. 5, 2023).
---------------------------------------------------------------------------

    Some commenters raised concerns about the requirement in proposed 
Sec.  463.6(a)(1) to preserve, inter alia, materially different 
advertisements, sales scripts, and marketing materials. One such 
dealership association commenter argued that dealers should not be 
required to retain sales scripts, training materials, and marketing 
materials, while another dealership association commenter argued that 
dealers should not be required to maintain advertisements, positing 
that these materials are publicly available and could be requested from 
advertisers as concerns arise with respect to particular ads. 
Commenters including two dealership organizations argued that digital 
advertisements would be difficult to retain, with one such commenter 
urging the Commission to adopt an approach that would permit dealers to 
retain a representative example of a vehicle advertisement and the 
underlying data used to populate vehicle ads. The other such commenter 
suggested that the proposed recordkeeping requirement could be unduly 
burdensome because ``all materials'' related to its online inventory 
``could be deemed some version of materially different advertisements 
and marketing materials regarding price or financing of a motor 
vehicle.'' Another dealership organization commenter raised a similar 
concern about website listings and questioned whether the term 
``advertisement'' includes television ads and email campaigns.
    After considering these comments, the Commission has determined 
that the proposed recordkeeping requirements in Sec.  463.6(a)(1) 
strike an appropriate balance by requiring the retention of materials 
needed to enable effective enforcement while only requiring such 
records to be retained for twenty-four months and in any legible form. 
Advertisements and marketing materials regarding the price, financing, 
or lease of a motor vehicle are critical to determining compliance with 
virtually every provision in the Final Rule, as they are often 
consumers' first contact in the vehicle-buying or -leasing process, and 
often contain key representations about pricing, payments, and other 
terms. Scripts and training materials are important evidence of a 
dealer's compliance program regarding the Final Rule's requirements, 
including of the information and instructions that dealership staff are 
given with respect to the areas that are addressed by the Final Rule. 
Furthermore, regarding the contention that advertisements are available 
publicly or could be requested separately, a core purpose of the 
recordkeeping requirement is to ensure that disseminated 
representations are preserved for a sufficient period of time to allow 
for compliance concerns to be addressed. A compliance regime that, 
contrary to the Commission's proposal, allowed the destruction of 
advertisements after they have been publicly presented, or that 
requires the Commission to try to obtain materials from advertisers or 
third parties, would not serve this purpose.
    With respect to the scope of advertisements that must be retained, 
the recordkeeping requirement does not differ with respect to the form 
of the advertisement, since the same enforcement concerns are raised 
regardless of whether an ad is presented in digital, hardcopy, email, 
audio, televised, or other format. The recordkeeping requirement does 
not require all advertisements to be retained, however, as Sec.  
463.6(a)(1) specifically includes the proviso that ``a typical example 
of a credit or lease advertisement may be retained for advertisements 
that include different Vehicles, or different amounts for the same 
credit or lease terms, where the advertisements are otherwise not 
Materially different.'' Regarding the commenter's proposal to allow 
dealers to retain a ``representative'' example of an advertisement with 
digital data that can recreate different versions of the advertisement, 
this provision, as proposed, permitted dealers to preserve typical 
examples of advertisements in this manner so long as such records are 
already kept in in the ordinary course of business, capture all 
differences that would be material to consumers, and accurately show 
how the offers have been presented to consumers. Materially different 
website listings, television advertisements, and email campaigns must 
be preserved, consistent with the plain meaning of the terms used in 
the section.
    With respect to proposed Sec.  463.6(a)(2)'s requirement to 
maintain copies of all materially different add-on lists, an industry 
association commenter contended that retaining materially different 
add-on lists would be difficult, given the scope of the term ``Add-on'' 
and the consequent size of the list as well as its dynamic nature. One 
dealership association commenter argued that the proposed requirement 
to retain add-on lists was unnecessary, contending that concerns could 
be addressed as they arise, and requesting to replace this proposed 
requirement with a requirement to retain a master copy of each 
insurance product, service contract, or other add-on in the dealer's 
general business file. After carefully considering the comments, the 
Commission has determined not to finalize the proposed requirement at 
Sec.  463.4(b) to disclose an add-on list, and consequently will not be 
finalizing the proposed requirement at Sec.  463.6(a)(2) that dealers 
retain materially different add-on lists.
    Several commenters, including industry associations, argued that 
certain of the proposed requirements to preserve written material, 
including written communications under proposed Sec.  463.6(a)(3) and 
written consumer complaints, and inquiries and responses about vehicles 
referenced in Sec.  463.4, under proposed Sec.  463.6(a)(5), would be 
unduly burdensome. Generally, these commenters contended that the 
various ways consumers may communicate with dealers--including chat 
features on a dealer's website, emails and text messages with 
salespersons, and social media posts--would require the development of 
new and onerous preservation systems. A dealership organization 
commenter raised concerns about retaining text messages and emails, 
contending that salespeople may use their personal phones and email 
addresses, even if the dealership has policies against such use. One 
industry association commenter argued that third parties might have 
records related to add-ons and that this provision should only apply to 
``complaints'' relating to add-ons instead of ``inquiries'' relating to 
add-ons. One dealership association commenter argued that dealers 
should not be required to retain consumer complaints, contending it 
should be the businesses' decision whether to maintain such materials, 
and also arguing that the Rule should not require, under proposed Sec.  
463.6(a)(4), the preservation of materials such as pricing options 
presented to consumers, contending that such materials should be 
limited to the two parties to the agreement.
    After considering these comments, the Commission has determined to 
finalize requirements to retain written materials

[[Page 658]]

under Sec.  463.6(a)(3), (4), and (5), with a limiting modification to 
Sec.  463.6(a)(4). These requirements are necessary to address unfair 
and deceptive practices by mandating that dealers preserve written 
materials that reflect the transactions between the dealer and 
purchasing consumers, and to assist the Commission in its enforcement 
of the Rule.\427\ Such materials are particularly important given that 
the vast majority of consumers do not file a complaint, and with hidden 
charges, many consumers never know about the illegal conduct in the 
first place.\428\ For instance, as explained in SBP II.B, a survey of 
one dealership group's customers showed that 83% of the respondents 
were subject to the dealer's unlawful practices related to add-ons. 
This equals 16,848 consumers--far more than the 391 complaints received 
against the dealer over the time period covered by the survey.
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    \427\ As noted previously, a dealership association commenter 
argued that dealers should not be required to preserve complaints 
and certain add-on materials, contending that it should be a 
business decision whether to retain such records. The Commission 
declines to substantively modify these requirements from the 
Commission's original proposal, given the importance of these 
materials in ensuring compliance with the other requirements of the 
Rule.
    \428\ See SBP II.B (discussing how complaints represent the tip 
of the iceberg in terms of actual consumer harm).
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    To minimize burden, as previously noted, the retention requirements 
are for a period of twenty-four months. Further, as stated previously, 
Sec.  463.6(b) permits dealers to retain records ``in any legible 
form,'' which could, for example, include using the backup and export 
features that already exist in many social media services, email 
platforms, chat platforms, and text systems, instead of creating 
entirely new systems. Regarding dealers that use third parties to 
administer add-ons, commenters did not explain why they cannot access 
records related to add-ons from these parties.\429\ Further, altering 
the language in the provision to apply to ``complaints'' rather than 
``inquiries'' related to add-ons could invite arguments that consumer 
statements, such as, ``Why was I charged for this add-on that I did not 
know about?'' are not ``complaints,'' but simply ``inquiries.'' With 
respect to the use of salespeople's personal devices to conduct motor 
vehicle dealer activities, including the sale, financing, or leasing of 
vehicles, as with any business, dealers should ensure that their 
employees are communicating with consumers through appropriate channels 
that can be monitored and controlled by the dealership.
---------------------------------------------------------------------------

    \429\ This is consistent with the Commission's prior enforcement 
order practice. See, e.g., Stipulated Order at 25, Fed. Trade Comm'n 
v. N. Am. Auto. Servs., Inc., No. 1:22-cv-0169 (N.D. Ill. Mar. 31, 
2022) (requiring retention of ``records of all consumer complaints 
and refund requests, whether received directly or indirectly, such 
as through a third party, and any response'').
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    Some commenters, including an industry association and a dealership 
organization, also raised concerns about how to determine what would 
constitute ``written consumer complaints'' under proposed Sec.  
463.6(a)(5). For purposes of the Rule, the Commission refers commenters 
to the plain meaning of the terms used in the phrase, which terms are 
commonly used and understood.\430\
---------------------------------------------------------------------------

    \430\ The term ``written'' means ``made or done in writing.'' 
See Written, Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/written (last visited Dec. 5, 2023). The term 
``consumer'' includes ``one that utilizes economic goods.'' See 
Consumer (def. a), Merriam-Webster.com Dictionary, https://www.merriam-webster.com/dictionary/consumer (last visited Dec. 5, 
2023). The term ``complaint'' includes an ``expression of grief, 
pain, or dissatisfaction,'' ``something that is the cause or subject 
of protest or outcry,'' and ``a formal allegation against a party.'' 
See Complaint (defs. 1, 2a, 3), Merriam-Webster.com Dictionary, 
https://www.merriam-webster.com/dictionary/complaint (last visited 
Dec. 5, 2023).
---------------------------------------------------------------------------

    Two industry association commenters argued that the proposed 
requirement to retain written communications would be particularly 
burdensome for recreational vehicle dealers, contending that that this 
was particularly so given that many RV dealers are small businesses. In 
response, the Commission notes that, as explained in the paragraph-by-
paragraph analysis of Sec.  463.2(e) and (f) in SBP III.B.2(e) and (f), 
it has determined not to finalize the Rule with respect to dealers 
predominantly engaged in the sale, leasing, or servicing of RVs, but it 
will continue to monitor the marketplace to determine whether 
modifications or revisions may be warranted in the future.
    Finally, one industry association commenter argued that the 
proposed recordkeeping requirements and costs were unwarranted given 
that the Commission has brought an average of fewer than four 
enforcement actions a year against motor vehicle dealers in the past 
decade. In response, the Commission notes that its experience indicates 
that the number of enforcement actions is not remotely reflective of 
the total violations of law in the auto marketplace. To uncover 
misconduct and bring actions, law enforcement agencies and officials 
often rely on complaints from affected parties. As previously 
discussed, however, consumer complaints typically represent just the 
``tip of the iceberg'' in terms of actual violations, and the vast 
majority of consumers who are subjected to unlawful practices in this 
area may not realize they are being victimized.\431\ Further, the 
Commission has limited law enforcement resources and jurisdiction over 
a broad range of commerce.\432\ The number of actions it brings 
relating to motor vehicle dealers--as with actions in any area--is 
necessarily limited by these resource constraints, even when there are 
ongoing, chronic problems that cause substantial consumer harm. Despite 
these constraints, the Commission and its law enforcement partners have 
taken significant action aimed at addressing unfair and deceptive 
practices in the motor vehicle marketplace, as explained in SBP II.C. 
Given that problems with bait-and-switch advertising, add-ons, and 
other aspects of vehicle-buying and -leasing have continued to be a 
source of consumer harm despite this action, additional measures are 
warranted. And the Commission has taken steps to minimize burden, 
including by declining to finalize the add-on list disclosure 
requirements in proposed Sec.  463.4(b), as well as the itemized 
disclosures required in proposed Sec.  463.5(b) and their corresponding 
proposed recordkeeping requirements. Moreover, the recordkeeping 
provisions permit dealers to retain records in any legible form, 
providing a flexible standard that permits the use of ordinary and 
standard forms of data and document retention.
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    \431\ See SBP II.B.
    \432\ See 15 U.S.C. 45(a).
---------------------------------------------------------------------------

    The Commission adopts in the Final Rule recordkeeping requirements 
largely as they were set forth in the proposed rule, with two 
substantive modifications. After careful consideration, the Commission 
is removing the requirements to retain copies of add-on lists required 
by proposed Sec.  463.6(a)(2) and records showing compliance with the 
cash price without optional add-ons disclosures and declinations 
required by proposed Sec.  463.6(a)(4). These changes will reduce 
record creation and retention burdens for dealers. As previously 
described, the Final Rule also contains one typographical modification 
of adding a serial comma and conforming edits for consistency with the 
defined terms in Sec.  463.2(e) and (f).
    The Commission adopts these recordkeeping requirements to promote 
effective and efficient enforcement of the Rule, thereby deterring and 
preventing deception and unfairness. As discussed throughout this SBP, 
the rulemaking record, including the

[[Page 659]]

Commission's law enforcement experience, indicates that there are 
chronic problems confronting consumers in the motor vehicle sales, 
financing, and leasing process, which include advertising 
misrepresentations and unlawful practices related to add-ons and hidden 
charges.\433\ The recordkeeping requirements in the Final Rule will 
assist the Commission in investigating and prosecuting law violations 
and help the Commission identify injured consumers for paying consumer 
redress. The recordkeeping requirements are flexible, allowing dealers 
to retain materials in any legible form, and are limited to a period of 
twenty-four months from the date the record is created. The 
recordkeeping requirements are consistent with, and similar to, the 
recordkeeping requirements in other Commission rules, as tailored to 
individual industries and markets.\434\
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    \433\ Some enforcement actions have specifically alleged that a 
defendant failed to maintain documents required under a prior order 
with the FTC. Complaint ]] 42-45, Fed. Trade Comm'n v. Norm Reeves, 
Inc., No. 8:17-cv-01942 (C.D. Cal. Nov. 3, 2017) (alleging dealer 
failed to keep records of previous advertisements needed to 
demonstrate compliance with prior order); Complaint ]] 32-35, Fed. 
Trade Comm'n v. New World Auto Imports, Inc., No. 3:16-cv-22401 at 
(N.D. Tex. Aug. 18, 2016) (same).
    \434\ See, e.g., 16 CFR 310.5 (Telemarketing Sales Rule); 16 CFR 
437.7 (Business Opportunity Rule); 16 CFR 453.6 (Funeral Industry 
Practices Rule); 16 CFR 301.41 (Fur Products Labeling Rule).
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G. Sec.  463.7: Waiver Not Permitted

    Proposed Sec.  463.7 prohibited waiver of the requirements of the 
Final Rule by providing that it constituted a violation of the Rule 
``for any person to obtain, or attempt to obtain, a waiver from any 
consumer of any protection provided by or any right of the consumer 
under'' the Rule. Comments that addressed this proposed provision 
generally either supported it or expressed no opinion on it. Comments 
in support noted that the provision would help provide consistency in 
the protection it would provide to consumers and emphasized that it 
would prohibit unscrupulous dealers from causing consumers to sign away 
their rights. This proposed provision was modeled on a similar 
provision in the Mortgage Assistance Relief Services (``MARS'') Rule, 
which was originally promulgated by the Commission and subsequently 
republished by the CFPB.\435\ Moreover, at least one State has a 
similar waiver provision in its rule covering motor vehicle dealer 
practices.\436\ The Commission concludes that this provision is 
necessary to prevent circumvention of the Rule, and, after review of 
the comments, adopts this prohibition as it was originally proposed.
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    \435\ See MARS Rule (Regulation O), 12 CFR 1015.8, previously 
published by the Commission at 16 CFR 322.1.
    \436\ See, e.g., Wis. Admin. Code Trans. 139.09 (similar waiver 
prohibition clause in Wisconsin's Motor Vehicle Trade Practices 
rule).
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H. Sec.  463.8: Severability

    Proposed Sec.  463.8 provided that the provisions of the Final Rule 
``are separate and severable from one another. If any provision is 
stayed or determined to be invalid, it is the Commission's intention 
that the remaining provisions will continue in effect.'' This proposed 
provision was modeled on similar provisions in other rules, including 
the Commission's Telemarketing Sales Rule and the MARS Rule.\437\ A 
number of commenters, including dealership associations, raised general 
concerns that the proposed provisions may be too integrated with each 
other for severability to be possible. Such commenters, however, did 
not provide examples of any such instances wherein they believed 
certain provisions could not remain in effect if other provisions were 
stayed or determined to be invalid. Upon consideration of the comments, 
the Commission concludes that severability is possible in the event any 
provision is stayed or determined to be invalid. The Rule the 
Commission is finalizing includes prohibitions against 
misrepresentations regarding material information (Sec.  463.3), 
required disclosures (Sec.  463.4), and prohibitions against charging 
for add-ons that provide no benefit or any item without express, 
informed consent (Sec.  463.5)--each of which dealers are capable of 
abiding by independently, as well as by the provisions that 
independently support their operation, including Authority (Sec.  
463.1), Definitions (Sec.  463.2), Recordkeeping (Sec.  463.6), Waiver 
not permitted (Sec.  463.7), and Relation to State laws (Sec.  463.9). 
Thus, the Commission has determined to adopt this provision in the 
Final Rule as it was originally proposed.
---------------------------------------------------------------------------

    \437\ See MARS Rule, 16 CFR 322.8 (Commission Rule), 12 CFR 
1015.11 (CFPB Rule); Telemarketing Sales Rule, 16 CFR 310.9.
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I. Sec.  463.9: Relation to State Laws

    Proposed Sec.  463.9 provided that the Rule does not supersede, 
alter, or affect ``any other State statute, regulation, order, or 
interpretation relating to Motor Vehicle Dealer requirements, except to 
the extent that such statute, regulation, order, or interpretation is 
inconsistent with'' the Rule, ``and then only to the extent of the 
inconsistency.'' Proposed Sec.  463.9 further provided that, for 
purposes of this provision, a State statute, regulation, order, or 
interpretation is not ``inconsistent'' if the protection such statute, 
regulation, order, or interpretation affords any consumer ``is greater 
than the protection provided under'' the Rule. After carefully 
considering the comments, the Commission adopts Sec.  463.9 largely as 
proposed in the Final Rule.
    Numerous State regulator commenters contended that the proposed 
rule would create a uniform baseline of protection that would 
complement State standards. A comment from a group of eighteen State 
attorneys general contended that many of the Proposed rule's 
requirements were similar to, or the same as, requirements that 
currently exist under State laws or regulations, and highlighted the 
benefit to law enforcement from establishing a consistent Federal 
baseline while providing States with flexibility to impose heightened 
consumer protections.\438\
---------------------------------------------------------------------------

    \438\ Comment of 18 State Att'ys Gen., Doc. No. FTC-2022-0046-
8062 at 11.
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    One municipal licensing entity commenter that expressed general 
support of the Commission's proposed rule also posited that the 
Commission should broaden proposed Sec.  463.9 to expressly include 
municipalities. With respect to the applicability of the provision to 
municipalities, the Commission notes that State political subdivisions 
exercise delegated power of their State, and as such, Sec.  463.9 
applies to municipal standards as well.\439\
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    \439\ See City of Columbus v. Ours Garage & Wrecker Serv., Inc., 
536 U.S. 424, 433 (2002) (``The principle is well settled that local 
governmental units are created as convenient agencies for exercising 
such of the governmental powers of the State as may be entrusted to 
them in its absolute discretion.'') (quoting Wis. Pub. Intervenor v. 
Mortier, 501 U.S. 597, 607-08 (1991)).
---------------------------------------------------------------------------

    Other commenters, including dealership associations, referred 
generally to potential conflicts between the Commission's proposed rule 
and State laws, but such commenters typically did not point to any 
specific purported conflicts with State law. To the extent some such 
commenters argued that certain proposed provisions would conflict with 
State laws, such arguments are addressed in the SBP's corresponding 
paragraph-by-paragraph analysis of the relevant Rule provision. 
Generally, the Commission is not aware of State laws that allow dealers 
to make misrepresentations regarding material information; prohibit the 
disclosure of

[[Page 660]]

accurate information regarding a vehicle's offering price, optional 
vehicle add-ons, or total payment information; or permit dealers to 
charge consumers for add-ons that provide no benefit to the consumer or 
to charge for items without consumers' express, informed consent. To 
the extent there truly are conflicts, as discussed in the following 
paragraphs, Sec.  463.9 establishes the framework for addressing any 
such inconsistencies.
    Commenters including dealership associations also argued that 
existing State standards are sufficient and identified State 
requirements that the commenters argued would be redundant with, or 
superior to, one or more provisions in the Commission's proposed rule. 
To the extent the Rule prohibits conduct that is already prohibited by 
State laws, the Commission has not seen evidence that State and Federal 
standards prohibiting the same misconduct has harmed consumers or 
competition. Moreover, such overlap is indicative of dealers' ability 
to comply with the relevant provisions in the Rule. To the extent State 
laws have additional requirements that provide greater protections or 
are not otherwise inconsistent with part 463, dealers must continue to 
follow those laws.
    Several dealership association commenters expressed concern 
regarding how to determine whether a State statute, regulation, order, 
or interpretation affords ``greater protection'' than a provision in 
the Commission's proposed rule. One such commenter, for example, raised 
concerns that proposed Sec.  463.5(a) may conflict with a pending 
California bill that would prohibit the sale of GAP when a vehicle has 
less than a 70% loan-to-value ratio. An industry association commenter 
claimed that the Commission's proposed definitions of ``Dealer or Motor 
Vehicle Dealer'' would conflict with analogous State definitions. In 
response, the Commission emphasizes that Sec.  463.9 would be triggered 
only if there were an actual inconsistency between State law and the 
Final Rule, and in the event of an inconsistency, the Rule only affects 
such State law to the extent of the inconsistency. The commenter 
examples did not present any such inconsistencies because it is 
possible to comply with both the cited State law examples and with the 
Final Rule. For instance, a dealer operating in a State that prohibits 
the sale of a GAP agreement when a vehicle transaction involves a loan-
to-value ratio below 70% would need to abide by the ratio set forth by 
State law and also by the Rule's prohibition against charging for the 
product if the consumer would not benefit from it. Similarly, 
notwithstanding a commenter's claims that the proposed rule's 
definition of ``Dealer or Motor Vehicle Dealer'' would conflict with 
analogous State standards, the commenter did not identify any actual 
conflicts; nevertheless, to the extent State and Federal standards 
cover independent areas or actors, each actor must comply with the 
standards--whether State, Federal, or both--under which the actor is 
covered.\440\ Further discussion of how State laws interact with 
specific sections of the Rule are explained in the corresponding 
section-by-section analysis for the relevant sections.
---------------------------------------------------------------------------

    \440\ See, e.g., Pirouzian v. SLM Corp., 396 F. Supp. 2d 1124, 
1131 (S.D. Cal. 2005) (reasoning that the more inclusive definition 
of ``debt collector'' under California law is not ``inconsistent'' 
with the Fair Debt Collection Practices Act because by ``enlarging 
the pool of entities who can be sued'' the State law offered greater 
protection).
---------------------------------------------------------------------------

    Some such commenters also questioned whether more coordination with 
States and Federal agencies was needed, without explaining what 
coordination was needed. In any event, the Commission coordinates 
regularly with States and Federal counterparts.
    Many commenters' concerns focused on the written disclosures 
proposed in Sec.  463.5(b), which the Commission has determined not to 
include in this Final Rule. For instance, a substantial number of 
commenters, including industry associations, argued that proposed Sec.  
463.5(b) would have created different Federal and State requirements 
for written disclosures that would result in duplicative paperwork. A 
dealership association specifically argued that proposed Sec.  463.5(b) 
may have conflicted with a State pre-contract disclosure requirement 
pertaining to six categories of add-ons because it would have required 
an additional disclosure about a broader category of add-ons. An 
industry association similarly pointed to this State's pre-contract 
disclosure requirement as a reason that additional disclosures under 
this Rule, including those required by proposed Sec.  463.5(b), could 
result in consumer confusion. At least four commenters, including 
industry associations and a dealership organization, argued that the 
proposed rule's requirement under Sec.  463.5(b) to create new 
documentation may conflict with the ``single document'' requirements, 
in effect in many States, which mandate that the entire motor vehicle 
sale, financing, or lease agreement--including any add-on products or 
services--be within one document. As discussed in the paragraph-by-
paragraph analysis of Sec.  463.5 in SBP III.E.2, the Commission has 
determined not to finalize the written disclosures requirement under 
this provision.
    After carefully considering the comments regarding proposed Sec.  
463.9, the Commission is finalizing this section largely as proposed, 
with one minor modification: the Commission is adding ``Covered'' to 
the term ``Motor Vehicle Dealer'' in Sec.  463.9(a) to conform with the 
revised definition in Sec.  463.2(f). Section 463.9 provides a uniform 
floor of protection with the Commission's Final Rule, while also 
permitting States to enact stronger protections, using a standard that 
has been applied in other laws and regulations for several 
decades.\441\ This provision is necessary to address unfair and 
deceptive practices and to enable the Commission to enforce the Rule.
---------------------------------------------------------------------------

    \441\ See, e.g., 10 U.S.C. 987(d)(1) (Military Lending Act); 15 
U.S.C. 1692n (Fair Debt Collection Practices Act); 12 CFR 1006.104 
(Regulation F); 15 U.S.C. 1693q (Electronic Funds Transfer Act); see 
also 21 U.S.C. 387p(a)(1) (Family Smoking Prevention and Tobacco 
Control Act).
---------------------------------------------------------------------------

IV. Effective Date

    The Final Rule becomes effective on July 30, 2024. One industry 
association commenter objected that the NPRM did not include an 
effective date or inquire into the timing for feasibly implementing the 
Rule. Another such commenter requested at least 18 months for 
stakeholders to prepare for Rule compliance, but did not explain why it 
would take 18 months to refrain from conduct that is already illegal, 
such as making misrepresentations. Rules are generally required to be 
published 30 to 60 days before their effective date, though in some 
circumstances, agencies may cite good cause for the rule to become 
effective sooner than 30 days from publication.\442\ Given the 
significant harm to consumers and law-abiding dealers from deceptive or 
unfair acts or practices; and the fact that, for dealers already 
complying with the law, compliance with the Rule the Commission is 
finalizing should not be onerous; the NPRM did not propose or 
contemplate any additional delay. Nevertheless, after a review of 
comments, the Commission is providing dealers until July 30, 2024 to 
make

[[Page 661]]

changes to their operations, if needed, in light of the Rule's 
requirements.
---------------------------------------------------------------------------

    \442\ See 5 U.S.C. 553(d) (requiring publication of a 
substantive APA rule ``not less than 30 days before its effective 
date'' except ``as otherwise provided by the agency for good cause 
found and published with the rule''). Significant rules defined by 
Executive Order 12866 and major rules defined by the Small Business 
Regulatory Enforcement Fairness Act are required to have a 60-day 
delayed effective date. See E.O. 12866, 58 FR 51735 (Oct. 4, 1993); 
5 U.S.C. 801(a)(3)).
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    On July 13, 2022, the Commission submitted the NPRM and an 
accompanying Supporting Statement to the Office of Management and 
Budget (``OMB'') for review under the Paperwork Reduction Act 
(``PRA''), 44 U.S.C. 3501-3521. On July 29, 2022, OMB directed the 
Commission to resubmit its request when the proposed rule was 
finalized.\443\
---------------------------------------------------------------------------

    \443\ OMB assigned the rulemaking control number 3084-0172 for 
PRA review purposes.
---------------------------------------------------------------------------

    The Commission is now submitting the Final Rule and a Supplemental 
Supporting Statement to OMB. The disclosure and recordkeeping 
requirements of the Rule constitute ``collection[s] of information'' 
for purposes of the PRA.\444\ The associated burden analysis 
follows.\445\
---------------------------------------------------------------------------

    \444\ 44 U.S.C. 3502(3); 5 CFR 1320.3(c).
    \445\ One commenter suggested the FTC did not comply with 
several provisions of the PRA, specifically those contained in 5 CFR 
1320.5(a)(1)(iv), 1320.8(d)(1), 1320.11(a), 1320.11(b), and 
1320.11(d). The commenter does not explain the basis for the 
purported deficiencies. These provisions generally relate to the 
submission of a collection of information to OMB, and solicitation 
and consideration of public comments. The FTC has complied with 
these provisions. The FTC submitted an Information Collection 
Request to Office of Management and Budget on July 13, 2022, 
concurrently with publication of the NPRM, in accordance with 5 CFR 
1320.11(b). See Motor Vehicle Dealers Trade Regulation Rule, ICR 
202202-3084-001, OMB 3084-0172, https://omb.report/icr/202202-3084-001. Because the FTC complied with this requirement, the collection 
of information proposed in the NPRM is not, as the commenter 
contends, subject to disapproval under 5 CFR 1320.11(d).
    The Commission also did not violate 5 CFR 1320.5(a)(1)(iv) and 
1320.11(a), providing for comments to be submitted to OMB, as the 
commenter contends. Those provisions are limited by 5 CFR 
1320.8(d)(3), which provides that the agency need not direct 
comments to OMB ``if the agency provides notice and comment through 
the notice of proposed rulemaking . . . for the same purposes as are 
listed under'' 5 CFR 1320.8(d)(1). The Commission solicited comments 
in the NPRM on the subjects enumerated in 5 CFR 1320.8(d)(1), see 
NPRM at 42028-31, 42035-43, and it was not necessary for the 
Commission to also direct those same comments to OMB. The Commission 
thus did not violate 5 CFR 1320.5(a)(iv) or 1320.11(a).
    Further, contrary to the commenter's assertion, the Commission 
demonstrated throughout the NPRM that the information collection-
related requirements it embodies are necessary, offer utility and 
public benefit, and minimize burdens. See, e.g., NPRM at 42027, 
42043. Moreover, the Commission requested comments on the necessity, 
utility, benefits, and burdens of the proposed rule, see NPRM at 
42028-31, 42035-43, and has further taken into consideration and 
addressed comments in this SBP.
---------------------------------------------------------------------------

    In the NPRM, the Commission provided estimates and solicited 
comments regarding the proposed rule, including regarding (1) the 
proposed add-on list disclosure requirement; (2) the proposed cash 
price without optional add-ons disclosure requirement; (3) other 
proposed provisions prohibiting certain misrepresentations and 
requiring certain disclosures; (4) the proposed recordkeeping 
provisions; and (5) estimated capital and other non-labor costs. As 
previously discussed, after carefully reviewing the comments, the 
Commission has made certain changes to the relevant provisions in the 
Final Rule. Specifically, the Commission has determined not to finalize 
requirements, pursuant to proposed Sec.  463.4(b), that dealers 
disclose an add-on list or, pursuant to proposed Sec.  463.5(b), that 
dealers refrain from charging for optional add-ons unless enumerated 
requirements relating to the vehicle's cash price without optional add-
ons are met.
    In the NPRM, the Commission estimated that the disclosure and 
recordkeeping requirements would impact approximately 46,525 franchise, 
new motor vehicle and independent/used motor vehicle dealers in the 
U.S.\446\ In the NPRM, the Commission explained that this figure was 
exclusive to automobile dealers, and invited comments regarding market 
information for dealers of other types of motor vehicles, such as 
boats, RVs, and motorcycles.\447\ In response, one industry association 
commenter noted the absence of such other motor vehicle dealers from 
the Commission's estimate. Another commenter also noted the absence of 
such dealers in the estimate and argued that the Commission's estimate 
also erroneously included independent used motor dealers which the 
commenter contended do not perform any servicing work, but stated that 
the Commission's estimate was fairly accurate numerically. As discussed 
in the paragraph-by-paragraph analysis of Sec.  463.2(e) in SBP 
III.B.2(e), the Commission has determined to expressly exclude 
``Recreational boats and marine equipment,'' ``Motorcycles, scooters, 
and electric bicycles,'' ``Motor homes, recreational vehicle trailers, 
and slide-in campers,'' and ``Golf carts'' from the Final Rule's 
definition of ``Covered Motor Vehicle.'' Further, as examined in the 
paragraph-by-paragraph analysis of Sec.  463.2(f) in SBP III.B.2(f), 
the plain meaning of the term ``servicing'' covers activities that are 
undertaken by independent used car dealers.\448\ Thus, the Commission 
bases its estimate of the entities covered by the Final Rule on the 
same North American Industry Classification System (``NAICS'') \449\ 
categories--``new car dealers'' and ``used car dealers''--as it did in 
the NPRM.\450\ As with other figures in this section, the NAICS data 
assembled by the U.S. Census Bureau have been revised since the 
publication of the Commission's NPRM with more recent data. Based on 
these revisions, the Commission now estimates that the Final Rule's 
disclosure and recordkeeping requirements will impact approximately 
47,271 franchise, new motor vehicle and independent/used motor vehicle 
dealers in the United States.\451\
---------------------------------------------------------------------------

    \446\ NPRM at 42031.
    \447\ NPRM at 42031 n.154, 42036.
    \448\ See also Used Car Rule, 81 FR at 81668 (noting that the 
term ``servicing'' used in this same context ``captures activities 
undertaken by essentially all used car dealers,'' including by 
preparing vehicles for sale by addressing any obvious mechanical 
problems and by undertaking the general industry practice of 
appearance reconditioning).
    \449\ NAICS is the standard used by Federal statistical agencies 
in classifying business establishments for the purpose of 
collecting, analyzing, and publishing statistical data related to 
the U.S. business economy. North American Industry Classification 
System, U.S. Census Bureau, https://www.census.gov/naics/.
    \450\ U.S. Census Bureau, ``All Sectors: County Business 
Patterns, including ZIP Code Business Patterns, by Legal Form of 
Organization and Employment Size Class for the U.S., States, and 
Selected Geographies: 2019,'' https://data.census.gov/cedsci/
table?q=CBP2019.CB1900CBP&n=44111%3A44112&tid=CBP2019.CB1900CBP&hideP
review=true&nkd=EMPSZES~001,LFO~001 (listing 21,427 establishments 
for ``new car dealers,'' NAICS code 44111, and 25,098 establishments 
for ``used car dealers,'' NAICS code 44112). See NPRM at 42031.
    \451\ U.S. Census Bureau, ``All Sectors: County Business 
Patterns, including ZIP Code Business Patterns, by Legal Form of 
Organization and Employment Size Class for the U.S., States, and 
Selected Geographies: 2021,'' https://data.census.gov/
table?q=CB2100CBP&n=44111:44112&tid=CBP2021.CB2100CBP&nkd=EMPSZES~001
,LFO~001 (listing 21,622 establishments for ``new car dealers,'' 
NAICS code 44111, and 25,649 establishments for ``used car 
dealers,'' NAICS code 44112).
---------------------------------------------------------------------------

    The estimated overall annual hours burden for the Final Rule's 
collections of information is 1,595,085 hours. The estimated overall 
annual labor cost for the Final Rule's collections of information is 
$51,904,537. The estimated overall annual capital and other non-labor 
cost for the Final Rule's collections of information is $14,181,300.

A. Add-On List Disclosures

    Section 463.4(b) of the proposed rule required motor vehicle 
dealers that charge for optional add-on products or services to 
disclose clearly and conspicuously in advertisements and on any 
website, online service, or mobile application through which they 
market motor vehicles, and at any dealership, an itemized add-on list 
of such products

[[Page 662]]

or services and their prices. In the NPRM, the Commission estimated 
costs for the add-on list disclosure and solicited comments on its 
burden analysis.\452\ One industry association made several arguments, 
including that the Commission underestimated the time and resources 
required because an add-on list can be lengthy, vary by vehicle and 
over time, and require working with several third parties. This 
commenter also argued that periodic revision of such lists would take 
more than the estimated one hour of clerical time per dealer, per year. 
The commenter, however, did not offer any specific estimates for such 
periodic revision activities.
---------------------------------------------------------------------------

    \452\ NPRM at 42032-33, 40235, 42040.
---------------------------------------------------------------------------

    As explained in the section-by-section analysis of Sec.  463.4 in 
SBP III.D.2, after careful consideration, the Commission has determined 
not to finalize its proposed add-on list provision at Sec.  463.4(b).

B. Disclosures Relating to Cash Price Without Optional Add-Ons

    Section 463.5(b) of the proposed rule required motor vehicle 
dealers that charge for optional add-on products or services to provide 
certain itemized disclosures regarding pricing and cost information 
without such add-ons. In response to the Commission's estimates with 
respect to this proposed provision, one industry association argued 
that the Commission did not provide adequate explanation of the 
assumptions it used to arrive at its cost estimates for this proposed 
provision, and contended that the Commission underestimated the costs 
associated with developing, printing, and presenting the proposed 
disclosures. This commenter also contended that the proposed 
requirement would have required significant training costs; that 
multiple forms would have been required for each motor vehicle 
transaction; and that aspects of the required disclosures would be 
duplicative of information already provided by dealerships in the 
ordinary course of business. The commenter estimated that developing a 
disclosure form for this proposed provision would cost dealers at least 
$750 and suggested that other attendant costs would be in the hundreds 
of millions or billions of dollars, without explaining how it arrived 
at such estimated figures.
    As explained in the section-by-section analysis of Sec.  463.5 in 
SBP III.E, after careful consideration, the Commission has determined 
not to include in this Final Rule the itemized disclosure provisions at 
proposed Sec.  463.5(b). The Commission notes that imposing 
unauthorized charges--including charges buried in lengthy contracts or 
included in contracts that consumers are rushed through--is a violation 
of both the Final Rule's Sec.  463.5(c) and of the FTC Act. The 
Commission will continue to monitor the market to determine whether 
additional steps are warranted to combat unauthorized charges for add-
ons or other items in the motor vehicle marketplace.

C. Prohibited Misrepresentations and Required Disclosures

    Section 463.3 of the Final Rule prohibits dealers from making any 
misrepresentation regarding material information about the categories 
enumerated in the section.
    The provisions in this section have been adopted largely without 
modification from the NPRM, wherein the Commission estimated that any 
additional costs associated with the proposed misrepresentation 
prohibitions would be de minimis.\453\ One industry association 
commenter argued that a bar on misrepresentations in the Final Rule 
would require increased training and compliance costs and result in 
longer transaction times and costs related to working with vehicle 
manufacturers about online advertisements. This section, however, does 
not require any additional disclosures or information collection. Thus, 
while dealers might elect to enhance their training and 
compliance,\454\ refraining from making misrepresentations does not 
require additional training or compliance costs or transaction time. 
The Commission therefore affirms its prior estimate that any additional 
costs associated with the prohibitions in Sec.  463.3 against making 
misrepresentations would be de minimis.
---------------------------------------------------------------------------

    \453\ NPRM at 42033, 42039.
    \454\ The Commission produced and considered alternative cost 
estimate scenarios for the Rule provisions in its preliminary 
regulatory analysis, see NPRM at 42036-44, and its final regulatory 
analysis in section VII. The Commission also invited comments on the 
accuracy of its PRA burden estimates, including the validity of the 
methodology and assumptions used, see NPRM at 42035. The Commission 
provides a single estimate per Rule provision for this separate 
Paperwork Reduction Act burden analysis in conformity with the PRA. 
See 44 U.S.C. 3506(c)(1)(A)(iv) (providing, for each collection of 
information, including those arising from rules published as final 
rules in the Federal Register, that agencies shall conduct a review 
that includes ``a specific, objectively supported estimate of 
burden'').
---------------------------------------------------------------------------

    Section 463.4(a) of the Final Rule requires dealers to clearly and 
conspicuously disclose a vehicle's offering price in advertisements and 
other communications that reference a specific vehicle, or any monetary 
amount or financing term for any vehicle. ``Offering Price'' is defined 
in Sec.  463.2(k) of the Rule as ``the full cash price for which a 
Dealer will sell or finance the Vehicle to any consumer, provided that 
the Dealer may exclude only required Government Charges.'' The 
information required by Sec.  463.4(a) is necessary to address unfair 
or deceptive conduct associated with the failure to provide such price 
information and unfairly charging unexpected prices or for hidden items 
that can add hundreds or thousands of dollars to a vehicle sale.\455\
---------------------------------------------------------------------------

    \455\ Some commenters suggested that providing an Offering Price 
may be difficult due to pricing changes over time. As explained in 
SBP III.D.2(a), limited-time offers should be clearly disclosed as 
such. Advertising prices without disclosing material limitations 
that would mislead consumers is a deceptive or unfair practice.
---------------------------------------------------------------------------

    This provision is being adopted largely as proposed.\456\ In 
response to the NPRM, one industry association commenter claimed there 
would be an average of three offering price disclosures per 
transaction, since, according to the commenter, consumers, on average 
discuss three specific motor vehicles per transaction. This commenter 
also contended that the number of required offering price disclosures 
would obligate dealers to incur additional training costs. As the 
Commission explained in its NPRM, vehicle pricing activities and 
representations are usually and customarily performed by dealers in the 
course of their regular business activities. While this provision may 
increase the importance of those activities, or alter when in the 
course of business they are undertaken, the Commission estimates that 
any additional attendant costs are de minimis.\457\
---------------------------------------------------------------------------

    \456\ As stated in SBP III.B.2(k) and SBP III.D.2(a), the 
Commission is finalizing this Offering Price definition at Sec.  
463.2(k) largely as proposed, with a modification to clarify that 
dealers may, but need not, exclude required government charges from 
a vehicle's offering price. In addition, this definition in the 
Final Rule substitutes ``Vehicle'' for ``motor vehicle'' to clarify 
that the term is consistent with the revised definition of 
```Covered Motor Vehicle' or `Vehicle' '' at Sec.  463.2(e). The 
Commission also added language to the end of Sec.  463.4(a) 
clarifying that the requirements in Sec.  463.4(a) ``also are 
prescribed for the purpose of preventing the unfair or deceptive 
acts or practices defined in this part, including those in 
Sec. Sec.  463.3(a) and (b) and Sec.  463.5(c).''
    \457\ See NPRM at 42033, 42039-40.
---------------------------------------------------------------------------

    Section 463.4(d) of the Final Rule require dealers, when making any 
representation about a monthly payment for any vehicle, to disclose the 
total amount the consumer will pay to purchase or lease the vehicle at 
that monthly payment after making all

[[Page 663]]

payments as scheduled, as well as the amount of consideration to be 
provided by the consumer if the total amount disclosed assumes the 
consumer will provide consideration. Section 463.4(e) of the Final Rule 
requires dealers, when making any comparison between payment options 
that includes discussion of a lower monthly payment to disclose, if 
true, that a lower monthly payment will increase the total amount the 
consumer will pay to purchase or lease the vehicle.
    These provisions have been adopted largely as proposed.\458\ In 
response to the Commission's estimates with respect to these proposed 
provisions, one commenter raised concerns that these disclosures would 
intrude on existing disclosures, and that any associated paperwork 
burden would be confusing, duplicative, and unnecessary. The commenter 
also argued that these disclosures would add time to the transaction 
process and require additional staff training. No commenters provided 
alternative estimates of the costs associated with this provision.
---------------------------------------------------------------------------

    \458\ These provisions in the Final Rule capitalize the defined 
term ``Vehicle'' to conform with the revised definition of `` 
`Covered Motor Vehicle' or `Vehicle' '' at Sec.  463.2(e). The 
Commission also substituted a period for a semi-colon and the word 
``and'' at the end of Sec.  463.4(d)(1), and added language to the 
end of Sec.  463.4(d) and (e) clarifying that the requirements in 
these paragraphs ``also are prescribed for the purpose of preventing 
the unfair or deceptive acts or practices defined in this part, 
including those in Sec. Sec.  463.3(a) and Sec.  463.5(c).''
---------------------------------------------------------------------------

    Failing to disclose information about the total of payments for a 
vehicle when representing monthly payment information is deceptive or 
unfair, as set forth in SBP III.D.2(d). Dealers already generate the 
required information during the normal course of business, and 
disclosing this total of payments information provides consumers with 
fundamental information that is readily available to the dealer when 
making representations regarding monthly payments, at which time such 
disclosures are required. Nevertheless, there may be upfront labor 
costs associated with developing procedures to provide these 
disclosures consistently at the appropriate point in the transaction 
and with training employees. The Commission estimates such upfront 
costs as follows: 8 compliance manager hours per dealer on implementing 
a template disclosure script that contains the required information and 
on ensuring sales staff consistently deliver the disclosure at an 
appropriate time during the transaction, for an upfront hours burden of 
378,168 (8 hours x 47,271). Applying labor cost-rates of $31.21 per 
hour yields $11,802,623.28 ($31.21 x 378,168 hours).\459\ After a 
review of comments, the Commission is adding ongoing training costs. 
Specifically, the Commission estimates annual ongoing costs of 1 hour 
of training time for sales and related employees per year, for an 
annual hours burden of 417,110 (1 hour x 417,110 sales and related 
employees). Applying labor cost-rates of $29.43 per hour, the total 
estimated ongoing labor cost burden is $12,275,547.30 across the 
industry (417,110 sales and related employees x 1 hour x $29.43).
---------------------------------------------------------------------------

    \459\ The estimates throughout this section have been updated 
with more recent data since the publication of the NPRM. Labor rates 
are based on new data from the Bureau of Labor Statistics. See U.S. 
Bureau of Labor Statistics, ``May 2022 National Industry-Specific 
Occupational Employment and Wage Estimates NAICS 441100--Automobile 
Dealers'' (Apr. 25, 2023), https://www.bls.gov/oes/current/naics4_441100.htm. The number of dealerships has been updated to 
reflect new data from Census County Business Patterns. See U.S. 
Census Bureau, ``All Sectors: County Business Patterns, including 
ZIP Code Business Patterns, by Legal Form of Organization and 
Employment Size Class for the U.S., States, and Selected 
Geographies: 2021,'' https://data.census.gov/
table?q=CB2100CBP&n=44111:44112&tid=CBP2021.CB2100CBP&nkd=EMPSZES~001
,LFO~001.
---------------------------------------------------------------------------

    Further, Sec.  463.4(c) of the Final Rule requires dealers that 
sell optional add-on products or services to disclose to consumers that 
these add-ons are not required, and that the consumer can purchase or 
lease the vehicle without these add-ons. This requirement has been 
adopted largely as proposed, and is necessary to address deceptive and 
unfair practices regarding these products or services, including 
misrepresentations that these products are required when they are not, 
and charging consumers for such products without the consumers' 
express, informed consent.\460\ It requires a simple disclosure of 
information that is known to the dealer, and the Commission anticipates 
that the information collection burdens associated with this 
requirement is de minimis.\461\
---------------------------------------------------------------------------

    \460\ This provision in the Final Rule capitalizes the defined 
term ``Vehicle'' to conform with the revised definition of `` 
`Covered Motor Vehicle' or `Vehicle' '' at Sec.  463.2(e). The 
Commission also added language to the end of Sec.  463.4(c) 
clarifying that the requirements in this paragraph ``also are 
prescribed for the purpose of preventing the unfair or deceptive 
acts or practices defined in this part, including those in 
Sec. Sec.  463.3(a) and (b) and Sec.  463.5(c).''
    \461\ As with Sec.  463.3, Sec.  463.5(a) does not require any 
additional disclosures or information collection. Thus, while 
dealers might elect to enhance their training and compliance 
policies, or to take steps to document compliance with Sec.  
463.5(a), any such additional measures are not required by this 
provision.
---------------------------------------------------------------------------

    Similarly, Sec.  463.5(c) of the Final Rule requires dealers to 
refrain from charging consumers for any item unless the dealer obtains 
the express, informed consent of the consumer for the charge.\462\ In 
response to the Commission's estimates with respect to these proposed 
provisions, some commenters generally discussed burdens, as addressed 
in the section-by-section analysis in SBP III, that they contended 
would accompany this proposed provision, but none provided sufficient 
detail for cost estimates. The Commission notes that this provision 
addresses the unfair or deceptive practice of charging consumers for 
items they do not know about or to which they have not agreed, or in 
amounts beyond those to which the consumer has agreed. As dealers must 
currently have policies in place to prevent charges without consent in 
order to comply with current law, the Commission anticipates that any 
burdens associated with this provision will be de minimis.\463\
---------------------------------------------------------------------------

    \462\ See SBP III.E.2(c).
    \463\ In its NPRM, the Commission noted that it anticipated this 
section would require dealers to provide readily available 
information to consumers in direct communications with customers, 
and that dealers complying with existing law have policies in place 
to prevent charges without consent, thereby estimating minimal 
additional resulting costs. See NRPM at 42033, 42036-44. The 
Commission did not receive comments discussing attendant burdens in 
sufficient detail for revised cost estimates, and thus affirms its 
prior estimate regarding additional costs associated with Sec.  
463.5(c).
---------------------------------------------------------------------------

D. Recordkeeping

    Section 463.6 of the Final Rule requires dealers to create and 
retain, for a period of twenty-four months from the date the record is 
created, all records necessary to demonstrate compliance with the Rule, 
including with its disclosure requirements. This provision has been 
adopted with revisions to account for other changes in the Final Rule, 
as explained in SBP III.F.\464\ These recordkeeping provisions are 
necessary to promote effective and efficient enforcement of the Rule, 
thereby deterring dealers from engaging in deceptive or unfair acts or 
practices.
---------------------------------------------------------------------------

    \464\ The Final Rule also contains one typographical 
modification to Sec.  463.6--adding a serial comma--and minor 
textual changes to ensure consistency with the defined terms at 
Sec.  463.2(e) and (f).
---------------------------------------------------------------------------

    In the NPRM, the Commission provided cost estimates and solicited 
comment on its recordkeeping burden analysis.\465\ The Commission 
anticipated that dealers would incur certain incremental costs related 
to: (i) recordkeeping systems; and (ii) calculations of loan-to-value 
ratios for contracts with GAP agreements.
---------------------------------------------------------------------------

    \465\ NPRM at 42033-34, 42043.
---------------------------------------------------------------------------

    Several commenters, including industry associations, dealership 
organizations, and a dealership

[[Page 664]]

association, generally contended that the Commission underestimated the 
burdens of compliance relating to the changes dealers would need to 
make to their existing recordkeeping systems. These commenters, 
however, did not provide the Commission with alternative estimates 
regarding such burdens. As explained in the section-by-section analysis 
of the Recordkeeping section, Sec.  463.6, in SBP III.F, this provision 
gives dealers the flexibility to retain materials in any legible form, 
including in the same manner, format, and place as they may already 
keep such records in the ordinary course of business. The Commission 
nonetheless has determined, in response to comments, to revise its 
estimates regarding incremental storage expenses that may be associated 
with the recordkeeping requirements in the Final Rule, and, as provided 
in the capital and other non-labor costs discussion in the following 
paragraphs, the Commission is adding an estimate of incremental 
additional storage costs to its estimate.
    Further, the Commission notes that its initial recordkeeping cost 
estimates were based on a proposal that required records regarding add-
on list disclosures and cash price without optional add-on 
disclosures--records that the Rule the Commission is finalizing does 
not require dealers to retain. Given that the Commission is not 
finalizing these additional record-related requirements, the estimates 
provided in its NPRM may overestimate attendant costs resulting from 
the Rule's recordkeeping requirements. Notwithstanding this 
possibility, the Commission maintains its prior calculations of the 
time required to modify existing recordkeeping systems.\466\ The 
Commission anticipates that it will take covered motor vehicle dealers 
approximately 15 hours to modify their existing recordkeeping systems 
to retain the required records for the 24-month period specified in the 
Rule. This yields a general recordkeeping burden of 709,065 hours 
annually (47,271 motor vehicle dealers x 15 hours per year).
---------------------------------------------------------------------------

    \466\ In its NPRM, the Commission estimated costs to create and 
implement a loan-to-value calculation process. NPRM at 42034. Such 
costs are already accounted for in the Commission's estimates for 
the time required to modify existing recordkeeping systems, and thus 
are not separately itemized here.
---------------------------------------------------------------------------

    The Commission anticipates that programming, administrative, 
compliance, and clerical staff are likely to perform the tasks 
necessary to comply with the recordkeeping requirements in Sec.  463.6 
of its Rule. In particular, the Commission estimates this 15-hour per-
dealer labor hours burden to design, implement, or update systems for 
record storage and create the templates necessary to accommodate 
retention of all relevant materials, as follows: 8 hours of time for a 
programmer, at a cost-rate of $40.24 per hour; 5 hours of additional 
clerical staff work, at a cost-rate of $20.16 per hour; 1 hour of sales 
manager review, at a cost-rate of $80.19 per hour; and 1 hour of review 
by a compliance officer, at a cost-rate of $31.21 per hour.\467\ 
Applying these cost-rates to the estimated per-dealer hours burden 
described previously, the total estimated initial labor cost burden is 
$534.12 per average dealership (($40.24 per hour x 8 hours) + ($20.16 
per hour x 5 hours) + ($80.19 per hour x 1 hour) + ($31.21 per hour x 1 
hour)), totaling $25,248,386.52 across the industry ($534.12 per 
average dealership x 47,271 dealerships).
---------------------------------------------------------------------------

    \467\ Applicable wage rates are based on data from the Bureau of 
Labor Statistics. See U.S. Bureau of Labor Statistics, ``May 2022 
National Industry-Specific Occupational Employment and Wage 
Estimates NAICS 441100--Automobile Dealers'' (Apr. 25, 2023), 
https://www.bls.gov/oes/current/naics4_441100.htm.
---------------------------------------------------------------------------

    The Commission also received comments regarding its cost estimates 
relating to the records of loan-to-value ratios for transactions that 
include GAP agreement sales. One industry association commenter argued 
that this recordkeeping requirement would also require additional 
training, that creating a loan-to-value calculator template for GAP 
agreements would be difficult given the variation of loan-to-value 
ratios, and that this recordkeeping requirement would lengthen the time 
to conduct vehicle sale or financing transactions.\468\ No commenter 
provided alternative estimates of the costs associated with the 
Commission's proposed recordkeeping requirements.
---------------------------------------------------------------------------

    \468\ These arguments are addressed in the section-by-section 
analysis of Sec.  463.5. See SBP III.E.
---------------------------------------------------------------------------

    As explained in the paragraph-by-paragraph analysis of Sec.  463.5 
in SBP III.E.2, the Commission is not mandating a particular LTV 
threshold or method of calculation, but rather requiring that dealers 
not charge a consumer for GAP agreements or other products or services 
if the consumer would not benefit from the product or service. The 
Commission anticipates that, to the extent dealers do not currently 
retain any materials used to make such an assessment, dealers may incur 
certain additional costs. Specifically, the Commission anticipates that 
dealers will expend one minute per sales or financing transaction for a 
salesperson to perform the calculation contemplated by this 
requirement, at a cost rate of $28.41 per hour. The Commission 
estimates that covered motor vehicle dealers sell approximately 
31,562,959 vehicles each year, and that approximately 17% of such sales 
include GAP agreements, for an estimated total of 5,444,502 covered 
vehicle sales.\469\ While the number of motor vehicles sold will vary 
by dealership, this yields an average sales volume of 115 sales 
transactions per average dealership per year that include a GAP 
agreement (5,444,502 covered vehicle sales/47,271 dealerships). This 
yields an estimated annual hours burden for all dealers of 90,742 hours 
(5,444,502 covered transactions x 1/60 hours). Applying the associated 
labor rates yields an estimated annual labor cost for all dealers of 
$2,577,980.22 (90,742 hours x $28.41 per hour).
---------------------------------------------------------------------------

    \469\ In response to comments, the Commission has revised the 
number of transactions across the industry from the NPRM to exclude 
private party and fleet transactions. The estimated percentage of 
sales including GAP agreements is derived from data provided by an 
industry commenter. Comment of Nat'l Auto. Dealers Ass'n, Doc. No. 
FTC-2022-0046-8368 at 12.
---------------------------------------------------------------------------

E. Capital and Other Non-Labor Costs

    The Commission anticipates that the Final Rule will impose limited 
capital and non-labor costs. The Commission presented estimates in the 
NPRM with respect to such costs and solicited comments on its burden 
analysis. Here, the Commission discusses its estimates for the capital 
and non-labor costs associated with the Rule's disclosure and 
recordkeeping requirements. While some commenters generally discussed 
burdens that they contended would accompany these proposed provisions, 
none provided any alternative cost estimates regarding capital and 
other non-labor costs.\470\
---------------------------------------------------------------------------

    \470\ One commenter claimed generally that the Commission 
underestimated these costs, referring to arguments the commenter 
made with respect to the Commission's burden analysis of specific 
disclosure and recordkeeping provisions. The Commission has 
responded to those arguments in the foregoing analysis, with the 
exception of recordkeeping storage costs, which are addressed in the 
following discussion.
---------------------------------------------------------------------------

1. Disclosures
    The Commission anticipates that the Rule's disclosure requirements 
will impose de minimis capital and other non-labor costs. As the 
Commission noted in the NPRM, dealers already have in place existing 
systems for providing sales- and contract-related disclosures to buyers 
and lessees, as well as to consumers seeking information during the 
vehicle-shopping process.\471\ While the Final Rule's disclosure 
requirements may result in limited additions to the

[[Page 665]]

information that must be provided during the transaction process, 
depending on a dealer's current business operations, the Commission 
anticipates that these changes will not require substantial investments 
in new systems.\472\ Further, many dealers may elect to furnish some 
disclosures electronically, further reducing total costs.\473\
---------------------------------------------------------------------------

    \471\ NPRM at 42034.
    \472\ Id.
    \473\ Id.
---------------------------------------------------------------------------

    The Commission previously estimated non-labor costs for providing 
disclosures in written or electronic form. This estimate was based on 
proposed Sec.  463.5(b), which required written disclosures in all 
transactions in which dealers charge for optional add-ons. As discussed 
in the paragraph-by-paragraph analysis of Sec.  463.5 in SBP III.E.2, 
the Commission has determined not to finalize the proposed provision at 
Sec.  463.5(b). While some commenters generally discussed burden with 
respect to disclosure requirements being finalized by the Commission, 
no commenter estimated non-labor costs associated with such 
requirements. The Commission estimates that the non-labor costs related 
to disclosures, which relate to fundamental information (the vehicle 
offering price, that optional add-ons are not required, and regarding 
the total amount to purchase or lease the vehicle), will be de minimis.
2. Recordkeeping
    In the NPRM, the Commission observed that dealers already have in 
place existing recordkeeping systems for the storage of documentation 
they would retain in the ordinary course of business irrespective of 
the Rule's requirements.\474\ Commenters including industry 
associations, a dealership organization, and a dealership association 
argued that the Commission underestimated the burdens associated with 
the Commission's proposed requirements to retain written 
communications, as well as the need to develop new systems to capture 
these materials. The Commission disagrees that the recordkeeping 
requirements in Sec.  463.6 mandate the creation of new recordkeeping 
systems. As explained in the section-by-section analysis of Sec.  
463.6, this provision gives dealers the flexibility to retain materials 
in any legible form, including in the same manner, format, or place as 
they may already keep such records in the ordinary course of business.
---------------------------------------------------------------------------

    \474\ Id.
---------------------------------------------------------------------------

    The Commission is, however, revising its estimates regarding 
incremental storage expenses that may be associated with the 
recordkeeping requirements in the Final Rule to add such recordkeeping 
storage costs to its estimate. The Commission previously noted, and 
continues to believe, that dealers that store records in hard copy are 
unlikely to require extensive additional storage for physical document 
retention, and, due to the low cost of electronic storage options, that 
expanding electronic storage capacity would impose minimal costs.\475\ 
The Commission also invited comments on estimated storage costs; while 
some commenters generally discussed burdens, as addressed in the 
section-by-section analysis of the recordkeeping requirements in Sec.  
463.6, that they contended would accompany the proposed provisions, the 
Commission did not receive any comments that provided estimates. The 
Commission nevertheless has conducted additional research, and now 
estimates that each dealer will need to spend approximately $300 per 
year in investment in additional IT systems and hardware for additional 
storage (either on premises or electronically) to retain records, the 
annual cost for which would be $14,181,300 for all covered dealers 
($300 x 47,271 covered dealers).\476\
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    \475\ NPRM at 42034-35.
    \476\ Our review of dealer transaction records suggests that a 
typical transaction generates 3.4 MB of data under the status quo. 
Given the average number of transactions per dealer, this suggests 
that storing all these records would require dedicated space of 
roughly 4.2 GB per year. With a two-year retention window, this 
corresponds to 8.4 GB of storage at any given time. We estimate that 
the (annual) amount budgeted here should be sufficient to maintain 
at least 1 TB of storage--either on premises or through a cloud 
storage vendor--which is sufficient for more than 100 times the data 
storage capacity necessary to retain all transaction files generated 
by a typical dealership in a year under the status quo. The 
Commission anticipates that this amount of data storage capacity 
will be more than sufficient to also allow for dealers to keep any 
necessary records of correspondence with consumers who ultimately do 
not complete transactions at the dealership.
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VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996,\477\ requires an 
agency to provide an Initial Regulatory Flexibility Analysis (``IRFA'') 
and Final Regulatory Flexibility Analysis (``FRFA'') of any rule 
subject to notice-and-comment requirements,\478\ unless the agency head 
certifies that the regulatory action will not have a significant 
economic impact on a substantial number of small entities.\479\ In the 
NPRM, the Commission provided an IRFA, stated its belief that the 
proposal will not have a significant economic impact on small entities, 
and solicited comments on the burden on any small entities that would 
be covered.\480\ In addition to publishing the NPRM in the Federal 
Register, the Commission announced the proposed rule through press 
releases, social media posts, and blog articles directed toward 
businesses and consumers, as well as through other outreach,\481\ in 
keeping with the Commission's history of small business guidance and 
outreach.\482\
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    \477\ See Public Law 104-121 (1996).
    \478\ 5 U.S.C. 603(a), 604(a).
    \479\ 5 U.S.C. 605(b).
    \480\ NPRM at 42035.
    \481\ See, e.g., Press Release, Fed. Trade Comm'n, ``FTC 
Proposes Rule to Ban Junk Fees, Bait-and-Switch Tactics Plaguing Car 
Buyers'' (June 23, 2022), https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-proposes-rule-ban-junk-fees-bait-switch-tactics-plaguing-car-buyers; Lesley Fair, ``Proposed FTC Rule Looks 
Under the Hood at the Car Buying Process,'' Fed. Trade Comm'n 
Business Blog (June 23, 2022), https://www.ftc.gov/business-guidance/blog/2022/06/proposed-ftc-rule-looks-under-hood-car-buying-process; Alan S. Kaplinsky, A Close Look at The Federal Trade 
Commission's Proposed Rule for Motor Vehicle Dealers, with Special 
Guests Sanya Shahrasbi and Daniel Dwyer, Staff Attorneys, FTC Bureau 
of Consumer Protection, Division of Financial Practices, Consumer 
Finance Monitor (Aug. 11, 2022), https://www.ballardspahr.com/Insights/Blogs/2022/08/Podcast-The-FTCs-Proposed-Rule-Motor-Vehicle-Dealer-Guests-Sanya-Shahrasbi-and-Daniel-Dwyer.
    \482\ Each year since FY2002, the Small Business 
Administration's Office of the National Ombudsman has rated the 
Federal Trade Commission an ``A'' on its small business compliance 
assistance work. See U.S. Small Business Administration, ``2013-2020 
SBA Nat'l Ombudsman's Ann. Reps. to Cong.,'' https://www.sba.gov/
document/report--national-ombudsmans-annual-reports-congress 
(providing reports from FY2013-FY2020); Letter from Joseph J. 
Simons, Chairman of the Federal Trade Commission, to Senator James 
Risch, Chairman of the Committee on Small Business and 
Entrepreneurship, U.S. Senate, and to Congressman Steve Chabot, 
Chairman of the Committee on Small Business, U.S. House of 
Representatives, https://www.ftc.gov/system/files/documents/reports/federal-trade-commission-rule-compliance-guides-small-businesses-other-small-entities-commission/tenth_section_212_report_to_congress_july_2016-june_2017_1_0.pdf 
(citing Commission's ``A'' rating for ``Compliance Assistance'' by 
the National Ombudsman from FY2002-FY2016).
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    The Commission thereafter received over 27,000 public comments, 
many of which identified themselves as being from small dealers, 
industry associations that represent small dealers, and employees of 
small dealers.\483\ The Commission greatly

[[Page 666]]

appreciates, and thoroughly considered, the feedback it received from 
such stakeholders in developing the Final Rule; made changes from the 
proposed rule in response to such feedback; and will continue to engage 
with stakeholders moving forward to facilitate implementation of the 
Rule.
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    \483\ The Commission received 27,349 comment submissions filed 
in response to its NPRM. See Gen. Servs. Admin., Doc. No. FTC-2022-
0046-0001, Proposed Rule, Motor Vehicle Dealers Trade Regulation 
Rule (July 13, 2022), https://www.regulations.gov/document/FTC-2022-0046-0001 (noting comments received). To facilitate public access, 
11,232 such comments have been posted publicly at 
www.regulations.gov. Id. (noting posted comments). Posted comment 
counts reflect the number of comments that the agency has posted to 
Regulations.gov to be publicly viewable. Agencies may choose to 
redact or withhold certain submissions (or portions thereof) such as 
those containing private or proprietary information, inappropriate 
language, or duplicate/near duplicate examples of a mass-mail 
campaign. Gen. Servs. Admin., Regulations.gov Frequently Asked 
Questions, https://regulations.gov/faq.
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    As previously discussed, after reviewing comments, the Commission 
has determined, as an alternative to finalizing the proposed rule in 
its entirety, to finalize a Rule that does not contain the proposed 
add-on list disclosure requirements at Sec.  463.4(b), or the proposed 
disclosures and declinations pertaining to a vehicle's cash price 
without optional add-ons at Sec.  463.5(b). Furthermore, as discussed 
in the paragraph-by-paragraph analysis of Sec.  463.2(e) in SBP 
III.B.2(e), in response to public comments and after careful 
consideration, the Commission has determined to exclude recreational 
boats and marine equipment; motorcycles; and motor homes, recreational 
vehicle trailers, and slide-in campers from the Rule's definition of 
``Covered Motor Vehicle.'' After careful consideration of the comments 
and following its determination not to finalize the proposed rule in 
its entirety, the Commission is certifying that the Final Rule will not 
have a significant economic impact on a substantial number of small 
entities. In the following paragraphs, the Commission discusses 
comments from the public, as well as from the U.S. Small Business 
Administration Office of Advocacy (``SBA Advocacy''), and the reasons 
for the Commission's conclusion that the Rule will not have a 
significant economic impact on a substantial number of small 
entities.\484\ Given, however, that the Commission believes that the 
vast majority of covered entities are small entities and provided an 
IRFA in the NPRM, in the interest of thoroughness, the Commission has 
also performed an FRFA, as described in SBP VI.B.2.
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    \484\ The Office of Advocacy has emphasized that, while it is 
housed within SBA, it is an independent, stand-alone office that has 
its own statutory charter, leadership structure, and appropriations 
account. SBA Advocacy, ``Background Paper: Office of Advocacy 2017-
2020'' 111-19 (Jan. 2021), https://advocacy.sba.gov/wp-content/uploads/2021/02/Background-Paper-Office-of-Advocacy-2017-2020-web.pdf; see also 15 U.S.C. 634a through 634g. SBA Advocacy's Chief 
Counsel is appointed from civilian life by the President, with the 
advice and consent of the Senate, and most of SBA Advocacy's 
professionals serve at the pleasure of the Chief Counsel. 15 U.S.C. 
634a, 634d(1) (empowering Chief Counsel for Advocacy to employ and 
fix the compensation of additional staff personnel); SBA Advocacy, 
``Background Paper: Office of Advocacy 2017-2020'' 95 (Jan. 2021), 
https://advocacy.sba.gov/wp-content/uploads/2021/02/Background-Paper-Office-of-Advocacy-2017-2020-web.pdf. SBA Advocacy does not 
circulate its work for clearance with the SBA Administrator, OMB, or 
any other Federal agency prior to publication. 15 U.S.C. 634f.
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A. Significant Impact Analysis

1. Comments on Significant Impact
    In the NPRM, the Commission stated its belief that the proposed 
rule would not have a significant economic impact on a substantial 
number of small entities, and invited comments.\485\ Several 
commenters, including industry associations and a dealership 
association, generally argued that the Rule would impose substantial 
economic burdens on small entities, and some suggested that small 
entities may be disproportionately burdened by the Rule given limited 
legal and compliance staff. No commenters provided comprehensive 
alternative empirical cost or revenue data that could be used to put 
costs in context. Commenters, including an industry association and SBA 
Advocacy, argued that the Commission did not provide a sufficient 
factual basis for, or analysis of, the effects on small entities, and 
that the proposed rule would be unduly burdensome for smaller motor 
vehicle dealers.\486\ The comment from SBA Advocacy further argued that 
the Commission provided no information about the economic impact of the 
proposed rule on small entities, but noted that if the total estimated 
cost of $1,360,694,552 were divided by the number of dealers estimated 
in the NPRM (46,525), the cost would be roughly $29,000 per such 
dealer.\487\ The comment from SBA Advocacy also argued that the 
Commission failed to include familiarization and training costs or 
costs that the Commission could not quantify, such as investments in 
additional IT systems and hardware.\488\
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    \485\ An industry association commenter argued that the 
Commission did not make a formal section 605(b) certification, 
publish the certification in the Federal Register, or provide the 
certification to the Chief Counsel for Advocacy of the Small 
Business Administration. This comment misunderstands the RFA. The 
RFA does not require certification when a rule is proposed. See 5 
U.S.C. 605(b) (providing that the head of the agency may make the 
certification ``at the time of publication of the final rule''). The 
Commission's NPRM stated its belief that the proposal would not have 
a significant economic impact on a substantial number of small 
entities, invited comment on this issue, and also provided an IRFA. 
The Commission has carefully reviewed the SBA's and others' 
comments, is making changes to the proposal, and is now publishing 
the Final Rule and making a formal certification, as is required by 
the RFA.
    Although the Commission included the NPRM in its Fall 2022 
Regulatory Agenda, and explained in its NPRM that the proposed 
rulemaking was not included in the Commission's Spring 2022 
Regulatory Agenda because the Commission first considered the NPRM 
after the publication deadline for the Regulatory Agenda, see NPRM 
at 42031 n.153, the same commenter argued that the RFA and Executive 
Order 12866 required the Commission to include it in earlier 
Regulatory Agendas. As an initial matter, Executive Order 12866 does 
not apply to independent agencies such as the FTC. Regardless, as 
discussed in SBP II.C, Commission has engaged in a sustained effort 
over many years to engage with consumer and dealer groups, and other 
stakeholders, regarding the issues addressed in the Rule. See supra 
note 90. Neither the RFA nor Executive Order 12866 precludes the 
Commission from promulgating the Rule regardless of whether it was 
included in an earlier Regulatory Agenda (or even arguably could 
have been). Section 602(d) of the RFA explicitly provides that 
``[n]othing in this section precludes an agency from considering or 
acting on any matter not included in a regulatory flexibility 
agenda.'' See Coastal Conservation Ass'n v. Locke, No. 2:09-CV-641-
FTM-29, 2011 WL 4530631, at *38 (M.D. Fla. Aug. 16, 2011), report & 
recommendation adopted sub nom. Coastal Conservation Ass'n v. Blank, 
No. 2:09-CV-641-FTM-29, 2011 WL 4530544 (M.D. Fla. Sept. 29, 2011) 
(denying request for injunction based on allegation of noncompliance 
with 5 U.S.C. 602(d)). Similarly, Executive Order 12866 explicitly 
provides that it ``does not create any right or benefit, substantive 
or procedural, enforceable at law or equity by a party against the 
United States,'' let alone one that would preclude adoption of the 
Rule. See E.O. 12866, 58 FR 51735, 51744 (Sept. 30, 1993); see also 
Trawler Diane Marie, Inc. v. Brown, 918 F. Supp. 921, 932 (E.D.N.C. 
1995), aff'd sub nom. Trawler Diane Marie, Inc. v. Kantor, 91 F.3d 
134 (4th Cir. 1996) (denying request to invalidate regulation based 
on allegation of noncompliance with Executive Order 12866).
    \486\ See Comment of SBA Advocacy, Doc. No. FTC-2022-0046-6664 
at 3.
    \487\ Comment of SBA Advocacy, Doc. No. FTC-2022-0046-6664 at 3.
    \488\ Comment of SBA Advocacy, Doc. No. FTC-2022-0046-6664 at 3.
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    The Commission has considered these comments carefully and has 
taken them into account in setting forth the factual basis for the 
certification in SBP VI.A.2, including by modifying its analysis to add 
an estimate of familiarization and training costs in response to such 
concerns.\489\ The Commission notes, as

[[Page 667]]

SBA Advocacy did in its comment, that the NPRM estimated a total cost 
for the proposed rule of $1,360,694,552. This estimate was for costs 
over a ten-year time period. Thus, dividing this estimate by the number 
of affected dealers estimated in the NPRM yields a cost of roughly 
$29,000 per dealer over a ten-year period--or approximately $2,900 per 
year per dealer.\490\ This figure--$2,900--is slightly more than the 
average gross profit described in the NPRM for a single vehicle sale by 
a new vehicle dealer, and less than half of the average gross profit 
described in the NPRM for a single vehicle sale by an independent used 
vehicle dealer.\491\
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    \489\ After additional research, the Commission estimates that 
each dealer will need to spend approximately $300 per year on 
storage (either on premises or in the cloud) to store the records 
the Rule requires them to maintain. Based on a review of the 
transaction records the Commission has received from dealers through 
investigations, this amount is likely to be more than sufficient. 
Commission review suggests that a typical vehicle transaction 
generates 3.4 MB of data under the status quo. Given the average 
number of transactions per dealer, this suggests that storing all 
these records would require dedicated space of roughly 4.2 GB per 
year. With a two-year retention window, this corresponds to 8.4 GB 
of storage at any given time. The Commission estimates that the $300 
annual amount budgeted here should be sufficient to maintain at 
least 1 TB of storage--either on premises or through a cloud storage 
vendor--which is sufficient for more than 100 times the data storage 
capacity necessary to retain all transaction files generated by a 
typical dealership in a year under the status quo. The Commission 
anticipates that this amount of data storage capacity will be more 
than sufficient to also allow for dealers to keep any necessary 
records of correspondence with consumers who ultimately do not 
complete transactions at the dealership.
    \490\ NPRM at 42013.
    \491\ As noted in the NPRM, new vehicle dealers averaged a gross 
profit of about $2,444 per new vehicle, and about $2,675 per used 
vehicle, and independent used vehicle dealerships had an average 
gross profit of more than $6,000 per vehicle. See NPRM at 42014 
(citing Nat'l Auto Dealers Ass'n, ``Average Dealership Profile'' 1 
(2020), https://www.nada.org/media/4136/download?attachment [http://web.archive.org/web/20220623204158/https://www.nada.org/media/4136/download?attachment] (June 23, 2022) and Nat'l Indep. Auto Dealers 
Ass'n, ``NIADA Used Car Industry Report 2020'' at 21).
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    After carefully reviewing the comments, the Commission does not 
conclude that the Final Rule will impose a significant economic burden 
on a substantial number of smaller entities.\492\ As described in SBP 
VI.A.2(b), the estimated economic impact of the Final Rule, controlling 
for firm size based on available census data, is less than or equal to 
0.27% of annual sales, 1.49% of the gross margin, and 4.12% of the 
gross margin minus operating expense for dealerships of all sizes.\493\ 
The Commission further notes that, in response to comments from SBA 
Advocacy and others, the Paperwork Reduction Act analysis incorporates 
additional estimates for training and storage costs beyond those 
estimated in the NPRM.
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    \492\ Notably, while many industry commenters claimed that the 
burden of the Rule would be substantial, none provided data on 
revenue or profit.
    \493\ U.S. Census Bureau, ``Annual Retail Trade Survey: 2021'' 
(Dec. 15, 2022), https://www.census.gov/data/tables/2021/econ/arts/annual-report.html. Gross margin minus operating expenses was 
determined by deducting total 2021 operating expenses ($144,268 
million) from 2021 gross margin ($226,118 million). Gross margin 
represents total sales less the cost of goods sold. Operating 
expenses include but are not limited to annual payroll, commissions, 
data processing, equipment, advertising, lease and rental payments, 
utilities, and repair and maintenance. See Glossary, U.S. Census 
Bureau, https://www.census.gov/glossary (last visited Dec. 5, 2023). 
Note that the operating expenses amount may include some costs--such 
as payments for deceptive advertising or commissions earned on 
unauthorized charges--that are not legitimate expenses. If these 
were excluded, the gross margin minus operating cost figures would 
be even lower than those described in the text.
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2. Certification of the Final Rule
    The Commission hereby certifies that the Final Rule will not have a 
significant economic impact on a substantial number of small entities.
    As an initial matter, the Commission believes that a substantial 
number of small entities are covered by the Rule. New vehicle dealers 
(NAICS code 44111) are classified as small entities if they have an 
average of 200 or fewer employees, and used car dealers (NAICS code 
44112) are classified as small entities if they have average annual 
revenues of $30.5 million or less.\494\ Census data indicate that the 
vast majority of dealers classified into these NAICS codes are small 
entities.\495\ There are approximately 47,271 covered dealers in the 
United States, of which over 93% have fewer than 100 employees. Thus, 
while the Commission cannot determine the precise number of small 
entities affected by the Rule, census data suggest that the vast 
majority of covered dealers are small entities.
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    \494\ See North American Industry Classification System, U.S. 
Census Bureau, https://www.census.gov/naics/. These standards are 
determined by the Small Business Size Standards component of the 
NAICS, which is available at https://www.sba.gov/document/support-table-size-standards.
    \495\ The census report does not provide sufficient detail to 
provide a precise numerical estimate of the number of small entities 
covered by the Rule. The census data provide the number of dealers 
with fewer than 250 employees, and also provide revenue and gross 
margin figures for the motor vehicle dealers industry, without 
further breakdown. For that reason, the census data do not provide 
sufficient information to calculate the specific number of dealers 
that are small entities. Nor did commenters provide comprehensive 
alternative firm size data.
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    The Commission certifies that the Rule will not have a significant 
economic impact on a substantial number of small entities. The 
Commission has analyzed the costs of the Rule (1) based on industry 
averages and (2) accounting for dealer size based on the number of 
employees. Under either measure, the Rule will not have a significant 
economic impact on a substantial number of small entities.
(a) Industry Averages
    The Commission estimates a total cost for the Final Rule, at the 
scenario reflecting the Commission's highest cost estimates, of $1.075 
billion to $1.270 billion over a ten-year period.\496\ Using the 
highest end of this highest-cost scenario, the Rule will have an 
estimated cost of $1.270 billion over ten years using a 3% discount 
rate. This translates to an average estimated per-year cost of $127 
million ($1.270 billion x 0.1). Census data show that, in 2021, 
automobile dealers had annual sales of $1.265 trillion, gross margin of 
$226.118 billion,\497\ and gross margin minus operating expenses of 
$81.850 billion. Discounting these numbers over a 10-year period using 
a 3% discount rate equates to average annual sales of $1.079 trillion, 
gross margin of $192.883 billion, and gross margin minus operating 
expenses of $69.820 billion. The estimated yearly cost of the Rule 
therefore is approximately 0.01% of annual sales ($127 million/$1.079 
trillion), 0.07% of gross margin ($127 million/$192.883 billion), and 
0.18% of gross margin minus operating expenses ($127 million/$69.820 
billion) across the industry.\498\
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    \496\ The $1.075 billion figure was determined by summing the 
unrounded total highest estimated costs associated with the Final 
Rule's total of payments disclosure requirements ($246 million), 
offering price disclosure requirements ($46 million), requirements 
regarding certain add-ons and express, informed consent ($406 
million), prohibitions on misrepresentations ($130 million), and 
recordkeeping requirements ($248 million), using a 7% discount rate. 
The $1.270 billion figure was determined by summing the unrounded 
total highest estimated costs associated with the Final Rule's total 
of payments disclosure requirements ($296 million), offering price 
disclosure requirements ($46 million), requirements regarding 
certain add-ons and express, informed consent ($475 million), 
prohibitions on misrepresentations ($157 million), and recordkeeping 
requirements ($296 million), using a 3% discount rate.
    \497\ U.S. Census Bureau, ``Annual Retail Trade Survey: 2021, 
Sales'' (Dec. 15, 2022), https://www2.census.gov/programs-surveys/arts/tables/2021/sales.xlsx (showing $1,264,635 million in estimated 
annual sales in 2021 for automobile dealers, NAICS code 4411); U.S. 
Census Bureau, ``Annual Retail Trade Survey: 2021, Gross Margin'' 
(Dec. 15, 2022), https://www2.census.gov/programs-surveys/arts/tables/2021/gm.xlsx (showing $226,118 million in estimated annual 
gross margin in 2021 for automobile dealers, NAICS code 4411); U.S. 
Census Bureau, ``Annual Retail Trade Survey: 2021, Total Operating 
Expenses'' (Dec. 15, 2022), https://www2.census.gov/programs-surveys/arts/tables/2021/exp.xlsx (showing $144,268 million in 
estimated annual operating expenses in 2021 for automobile dealers, 
NAICS code 4411).
    \498\ The calculations in this analysis were performed using 
unrounded inputs in order to maintain accuracy. Nevertheless, for 
ease of reference, such inputs have been rounded where they are 
described in the text.
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(b) Dealer Size Based on the Number of Employees
    In addition to considering industry averages, the Commission has 
analyzed the cost of the Rule accounting for dealer size based on the 
number of employees. Certain costs are fixed (i.e., remain the same 
regardless of the number of employees) while other costs scale with 
dealer size. We consider both

[[Page 668]]

(1) first-year compliance costs and (2) costs in subsequent years.
    (1) First-year compliance costs. First-year compliance costs are 
the sum of: (1) upfront fixed costs; (2) one year of annual ongoing 
costs that are fixed; and (3) one year of annual ongoing costs that 
scale.
    The Commission estimates the upfront fixed costs per dealer under 
the highest-cost scenario as follows: $963.44 to update policies and 
procedures to provide the offering price disclosure required by Sec.  
463.4(a) ((8 estimated pricing hours \499\ x $80.19 per hour) + (8 
estimated programming hours x $40.24 per hour)); $249.68 to design 
disclosures required by Sec.  463.4(d) and (e) and inform associates of 
their obligations to provide these disclosures (8 estimated compliance 
manager hours x $31.21 per hour); $1,783.56 to cull add-ons with no 
consumer benefit from offerings, develop policies regarding when 
certain add-ons may or may not be sold, and create nonmandatory 
disclosures, in response to the requirements of Sec.  463.5 ((16 
estimated compliance manager hours x $31.21 per hour) + (12 estimated 
sales manager hours x $80.19 per hour) + (8 estimated programmer hours 
x $40.24 per hour)); and $534.12 to upgrade recordkeeping systems and 
create the templates necessary to accommodate retention of all relevant 
material under Sec.  463.6 ((8 estimated programmer hours x $40.24 per 
hour) + (5 estimated clerical hours x $20.16 per hour) + (1 estimated 
sales manager hour x $80.19 per hour) + (1 estimated compliance manager 
hour x $31.21 per hour)). These figures total $3,530.80 per 
dealer.\500\
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    \499\ As used here, ``pricing hours'' means time spent by a 
sales and marketing manager reviewing dealership policies and 
procedures for determining the public-facing prices of vehicles in 
inventory.
    \500\ Applicable wage rates throughout this section are based on 
data from the Bureau of Labor Statistics. See U.S. Bureau of Labor 
Statistics, ``May 2022 National Industry-Specific Occupational 
Employment and Wage Estimates NAICS 441100--Automobile Dealers'' 
(Apr. 25, 2023), https://www.bls.gov/oes/current/naics4_441100.htm.
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    The Commission estimates the annual fixed ongoing costs per dealer 
for the first year under the highest-cost scenario as follows: $390.13 
to conduct a heightened compliance review of public-facing 
representations to ensure compliance with Sec.  463.3 (150 estimated 
documents per year x 5 estimated minutes of review per document x 
$31.21 per hour of compliance officer review); and $300 estimated for 
expanded storage to retain records required under Sec.  463.6. These 
figures total $690.13 per dealer per year.
    The Commission estimates annual ongoing costs that scale with 
dealer size based on number of employees as follows. The Commission 
estimates that annual costs that scale with dealer size are $76.86 per 
employee per year. Annual ongoing costs that scale with dealer size 
include: $26.53 per employee to provide the total of payments 
disclosures required by Sec.  463.4(d) and (e) (((417,110 sales & 
related employees x 1 estimated hour for training x $29.43 per hour) + 
(19,228,256 total covered transactions involving monthly payments or 
financing x (2/60 estimated disclosure hours per transaction x $28.41 
per hour + $0.15 printing costs per disclosure)))/1,257,877 total 
employees); $36.40 per employee for training and the delivery of a 
disclosure under a regime in which dealers choose to deliver an 
itemized disclosure to comply with Sec.  463.5 (((417,110 sales & 
related employees x 1 estimated hour for training x $29.43 per hour) + 
((10,343,319 new vehicle sales + 21,219,640 used vehicle sales) x (2/60 
estimated disclosure hours per sale transaction x $28.41 per hour + 
$0.11 physical costs per disclosure)))/1,257,877 total employees); and 
$13.93 per employee to generate and store calculations required to be 
retained under Sec.  463.6 ((31,562,959 vehicle sales x 1/60 estimated 
hours per transaction x $28.41 per hour/1,257,877 total employees) + 
(5,444,502 vehicle sales with GAP agreement x 1/60 estimated hours per 
transaction x $28.41 per hour/1,257,877 total employees)).
    Next, the Commission uses census data on the average number of 
employees at dealerships within different dealer size cohorts to 
determine the per-dealer cost for each dealer cohort.\501\ Multiplying 
the estimated cost per employee ($76.86) by the average number of 
employees within different dealer size cohorts yields annual ongoing 
scaled costs per dealer of: $124.59 per dealer with fewer than 5 
employees ($76.86 x 1.62 employees); $499.59 per dealer with between 5 
and 9 employees ($76.86 x 6.50 employees); $1,058.73 per dealer with 
between 10 and 19 employees ($76.86 x 13.77 employees); $2,584.18 per 
dealer with between 20 and 49 employees ($76.86 x 33.62 employees); 
$5,343.19 per dealer with between 50 and 99 employees ($76.86 x 69.52 
employees); $10,784.88 per dealer with between 100 and 249 employees 
($76.86 x 140.31 employees); $24,384.79 per dealer with between 250 and 
499 employees ($76.86 x 317.25 employees); $44,623.26 per dealer with 
between 500 and 999 employees ($76.86 x 580.56 employees); and 
$147,085.08 per dealer with 1,000 or more employees ($76.86 x 1,913.60 
employees).
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    \501\ Based on 2021 census data, dealers with fewer than five 
employees have an average of 1.62 employees (34,616 employees at all 
dealerships with fewer than five employees/21,356 dealers with fewer 
than five employees); dealers with 5-9 employees have an average of 
6.50 employees (35,794 employees/5,507 dealers); dealers with 10-19 
employees have an average of 13.77 employees (52,852 employees/3,837 
dealers); dealers with 20-49 employees have an average of 33.62 
employees (253,365 employees/7,536 dealers); dealers with 50-99 
employees have an average of 69.52 employees (423,351 employees/
6,090 dealers); dealers with 100-249 employees have an average of 
140.31 employees (386,001 employees/2,751 dealers); dealers with 
250-499 employees have an average of 317.25 employees (57,105 
employees/180 dealers); dealers with 500-999 employees have an 
average of 580.56 employees (5,225 employees/9 dealers); and dealers 
with 1,000 or more employees have an average of 1,913.60 employees 
(9,568 employees/5 dealers). See U.S. Census Bureau, ``All Sectors: 
County Business Patterns, Including ZIP Code Business Patterns, by 
Legal Form of Organization and Employment Size Class for the U.S., 
States, and Selected Geographies: 2021,'' https://data.census.gov/
table?q=CB2100CBP&n=44111:44112&tid=CBP2021.CB2100CBP&nkd=LFO~001.
---------------------------------------------------------------------------

    Thus, the total first-year compliance costs based on dealer size 
are $4,345.51 ($3,530.80 + $690.13 + $124.59) per dealer with fewer 
than 5 employees; $4,720.51 ($3,530.80 + $690.13 + $499.59) per dealer 
with between 5 and 9 employees; $5,279.66 ($3,530.80 + $690.13 + 
$1,058.73) per dealer with between 10 and 19 employees; $6,805.11 
($3,530.80 + $690.13 + $2,584.18) per dealer with between 20 and 49 
employees; $9,564.12 ($3,530.80 + $690.13 + $5,343.19) per dealer with 
between 50 and 99 employees; $15,005.80 ($3,530.80 + $690.13 + 
$10,784.88) per dealer with between 100 and 249 employees; $28,605.72 
($3,530.80 + $690.13 + $24,384.79) per dealer with between 250 and 499 
employees; $48,844.18 ($3,530.80 + $690.13 + $44,623.26) per dealer 
with between 500 and 999 employees; and $151,306.01 ($3,530.80 + 
$690.13 + $147,085.08) per dealer with 1,000 or more employees.
    To analyze the economic effect of the costs of the Rule by dealer 
size, the Commission compares per-dealer costs to per-dealer sales, 
gross margin, and gross margin minus operating expenses. The Commission 
does not have data on how sales, gross margin, and operating expenses 
are apportioned to dealerships based on the number of employees. 
Accordingly, the Commission assumes that sales, gross margin, and 
operating expenses are apportioned to dealerships pro rata with the 
number of employees. Dividing the 2021 industry-wide figures for annual 
sales ($1.265 trillion), gross margin ($226.118 billion), and gross 
margin minus operating expenses ($81.850 billion) by the total number 
of

[[Page 669]]

employees (1,257,877),\502\ each employee represents an additional 
$1,005,372.54 in sales ($1.265 trillion/1,257,877 employees), 
$179,761.61 in gross margin ($226.118 billion/1,257,877 employees), and 
$65,069.96 in gross margin minus operating expenses ($81.850 billion/
1,257,877 employees). Multiplying these per-employee figures by the 
average number of employees of dealers within different size cohorts 
provides per-dealer sales, gross margin, and gross margin minus 
operating expenses for each cohort. For instance, dealers with fewer 
than 5 employees have estimated annual sales of $1,629,611.16 (1.62 
employees x $1,005,372.54 sales per employee), annual gross margin of 
$291,376.10 (1.62 employees x $179,761.61 gross margin per employee), 
and annual per-dealer gross margin minus operating expenses of 
$105,472.17 (1.62 employees x $65,069.96 gross margin minus operating 
expenses per employee).
---------------------------------------------------------------------------

    \502\ Data on the number of employees comes from the 2021 
census. See U.S. Census Bureau, ``All Sectors: County Business 
Patterns, Including ZIP Code Business Patterns, by Legal Form of 
Organization and Employment Size Class for the U.S., States, and 
Selected Geographies: 2021,'' https://data.census.gov/
table?q=CB2100CBP&n=44111:44112&tid=CBP2021.CB2100CBP&nkd=EMPSZES~001
,LFO~001.
---------------------------------------------------------------------------

    The Commission then divides first-year compliance costs by these 
figures to yield cost as a percentage of sales, gross margin, and gross 
margin minus operating costs. Applying this method to each of the 
dealer size cohorts, first-year compliance costs are equivalent to: 
0.27% of annual sales ($4,345.51/$1,629,611.16), 1.49% of gross margin 
($4,345.51/$291,376.10), and 4.12% of gross margin minus operating 
expenses ($4,345.51/$105,472.07) for dealers with fewer than 5 
employees; 0.07% of annual sales ($4,720.51/$6,534,647.69), 0.40% of 
gross margin ($4,720.51/$1,168,401.53), and 1.12% of gross margin minus 
operating expenses ($4,720.51/$422,936.98) for dealers with 5-9 
employees; 0.04% of annual sales ($5,279.66/$13,848,305.89), 0.21% of 
gross margin ($5,279.66/$2,476,090.91), and 0.59% of gross margin minus 
operating expenses ($5,279.66/$896,293.27) for dealers with 10-19 
employees; and less than one-half of one percent of the annual sales, 
gross margin, and gross margin minus operating expenses for the 
remaining categories of dealers.
    (2) Costs in subsequent years. The estimated cost of compliance 
with the Rule drops after the first year, given the absence of upfront 
costs, which are not incurred after the first year. Compliance costs in 
subsequent years--which are limited to annual ongoing costs (both fixed 
and those that scale with dealer size)--are therefore a smaller 
percentage of annual sales, gross margin, and gross margin minus 
operating expenses, equal to less than two percent of these metrics for 
dealers of all sizes.\503\
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    \503\ Average ongoing compliance costs after the first year 
equal: 0.05% of annual sales, 0.28% of gross margin, and 0.77% of 
gross margin minus operating expenses for dealers with fewer than 5 
employees, and less than one-half of one percent of annual sales, 
gross margin, and gross margin minus operating expenses for the 
remaining categories of dealers.
---------------------------------------------------------------------------

    The Commission does not find that these compliance costs represent 
a significant economic burden. The Commission therefore certifies that 
the Final Rule will not have a significant economic impact on a 
substantial number of small entities.

B. Initial and Final Regulatory Flexibility Analysis

    The NPRM noted the Commission's belief that the proposed rule would 
not have a significant economic impact on small entities, but 
nevertheless examined the six IRFA factors, and invited comment on the 
proposed rule's burdens on small businesses. In the following 
paragraphs, the Commission discusses comments and then sets forth a 
FRFA.
1. Comments on the Initial Regulatory Flexibility Analysis
(a) Description of the Reasons Why Action by the Agency Is Being 
Considered
    The IRFA explained that the Commission proposed the Rule to address 
misleading practices and unauthorized charges to consumers during the 
vehicle buying or leasing process, and to deter dealer misconduct and 
remedy consumer harm. The Commission further noted that its law 
enforcement, outreach and other engagement in this area, and the 
hundreds of thousands of consumer complaints received by the FTC, 
indicated that dealership misconduct and deceptive tactics persisted 
despite Federal and State law enforcement efforts. In response, the 
comments from SBA Advocacy and one industry group argued that the 
number of complaints received by the Commission is insufficient to 
support a rulemaking given the total number of vehicle transactions in 
the United States.\504\ Similarly, the industry group argued that the 
Commission has not filed enough law enforcement actions against motor 
vehicle dealers to justify the proposal, and that, where it has brought 
enforcement actions, the Commission has managed to obtain redress for 
harmed consumers without the need for an additional monetary remedy. As 
explained in SBP II.B and in the section-by-section analysis of the 
recordkeeping requirements in Sec.  463.6 in SBP III.F,

[[Page 670]]

consumer complaints represent the ``tip of the iceberg'' of actual 
misconduct, as many unlawful practices go undetected or unreported by 
consumers. Further, the Commission has taken significant action aimed 
at addressing law violations in the motor vehicle dealer marketplace, 
despite limited resources and a broad mandate to address unlawful 
practices across much of the nation's commercial activity,\505\ and, 
particularly given the Supreme Court's 2021 ruling limiting the FTC's 
ability to obtain redress for consumers, it is difficult to get full 
redress for consumers.\506\ Despite these Commission actions, as well 
as the hundreds of additional actions brought by other Federal and 
State regulators, the deceptive or unfair acts or practices addressed 
by the proposed rule persist.
---------------------------------------------------------------------------

    \504\ Comment of SBA Advocacy, Doc. No. FTC-2022-0046-6664 at 6. 
SBA Advocacy also raised concerns that the proposal could make the 
buying process more cumbersome and confusing, noting that the 
proposal requires additional disclosures, and the proposal 
prohibited dealers from relying on a signed or initialed document, 
by itself, or prechecked boxes to establish express, informed 
consent. These arguments are addressed in the discussion of 
disclosures in Sec. Sec.  463.4, 463.5 and the definition of 
``Express, Informed Consent'' in Sec.  463.2.
    The industry group also argued that the number of complaints is 
overstated because it includes: (1) complaints that are not 
applicable to motor vehicle dealers or conduct addressed by the 
Rule, and (2) consumers who did not report a loss. This industry 
group also argued that the Commission failed to take notice of 
survey data indicating that the majority of consumers are satisfied 
with their vehicle purchases. See, e.g., Cox Auto., ``2021 Cox 
Automotive Car Buyer Journey Study'' (2022) [hereinafter 2021 Cox 
Automotive Car Buyer Journey Study], https://www.coxautoinc.com/wp-content/uploads/2022/01/2021-Car-Buyer-Journey-Study-Overview.pdf. 
First, in the Commission's experience, complaints understate harm 
caused by unlawful conduct in a given category, notwithstanding any 
inclusion of complaints that may pertain to ancillary or related 
issues. See SBP II.B (discussing how complaints represent the tip of 
the iceberg in terms of actual consumer harm and citing case where 
prior to FTC action, there were 391 complaints about add-ons and 
other issues but survey results during the same period indicted that 
at least 16,848 customers were subject to unlawful practices related 
to add-ons alone). Moreover, the Commission's reported complaint 
numbers may be underinclusive of relevant complaints filed by 
consumers (e.g., complaints about vehicle financing issues may be 
filed under the ``Banks and Lenders'' category; vehicle repossession 
issues may be filed under the ``Debt Collection'' category; and 
complaints about deceptive online vehicle shopping may be filed 
under the ``Online Shopping and Negative Reviews'' category). With 
regard to consumers who did not report a loss, the Commission 
disagrees that such consumers were not harmed or that their 
experience is not relevant to the Rule. For example, many consumers 
experience a law violation or other harmful conduct, but choose not 
to consummate the transaction, including consumers who waste time 
pursuing misleading offers. Further, survey data indicating that a 
majority of customers are ``satisfied'' do not indicate whether 
those customers had hidden charges in their contracts and whether 
they ever became aware of such charges. Surveys cited by the 
Commission have identified situations where customers are unaware of 
add-on charges in their contracts; indeed, in one case, 79% of 
consumers were unaware of such charges. See SBP II.B (discussing 
hidden charges in auto contracts). Consumers might be satisfied with 
a purchase until they later learn they are paying for items they did 
not authorize, if they learn this at all. Further, ``the FTC need 
not prove that every consumer was injured. The existence of some 
satisfied customers does not constitute a defense . . . .'' Fed. 
Trade Comm'n v. Amy Travel Serv., Inc., 875 F.2d 564, 572 (7th Cir. 
1989), vacated in part on other grounds, Fed. Trade Comm'n v. Credit 
Bureau Ctr., LLC, 937 F.3d 764 (7th Cir. 2019); accord Fed. Trade 
Comm'n v. Stefanchik, 559 F.3d 924, 929 n.12 (9th Cir. 2009).
    \505\ One industry group argued that the majority of the FTC's 
enforcement actions have pertained to deceptive advertising, and few 
have alleged unlawful conduct involving add-ons. The Commission 
agrees that many of its actions have alleged deceptive pricing. In 
focusing on certain actions that involved allegations that dealers 
placed unauthorized charges for add-ons, however, the commenter 
leaves out other unlawful conduct related to add-ons. Such conduct 
includes, for example, misrepresentations regarding the pricing of 
add-ons (Complaint ]] 6-12, TT of Longwood, Inc., No. C-4531 (F.T.C. 
July 2, 2015)), or failing to disclose that mandatory add-ons were 
included in the cost of credit (Consent Order ]] 73-75, Y King S 
Corp., CFPB No. 2016-CFPB-0001 (Jan. 21, 2016)). In addition, 
unauthorized charges are likely to go unnoticed by consumers, which 
can hamper enforcement efforts. See, e.g., Auto Buyer Study, supra 
note 25, at 14 (describing several study participants who thought 
they had not purchased add-ons, or that add-ons were free, and only 
learned during the study that they were charged for add-ons).
    \506\ See AMG Cap. Mgmt., LLC v. Fed. Trade Comm'n, 141 S. Ct. 
1341 (2021).
---------------------------------------------------------------------------

(b) Succinct Statement of the Objectives of, and Legal Basis for, the 
Proposed Rule
    The objectives of the Rule and its legal basis, including the 
specific grant of rulemaking authority under section 1029 of the Dodd-
Frank Act, 12 U.S.C. 5519, were set forth in the IRFA.\507\ The 
objectives and legal basis, and comments on these topics, additionally 
have been discussed throughout this SBP.
---------------------------------------------------------------------------

    \507\ NPRM at 42035.
---------------------------------------------------------------------------

(c) Description of and, Where Feasible, Estimate of the Number of Small 
Entities to Which the Proposed Rule Will Apply
    In its IRFA, the Commission estimated that there were approximately 
46,525 franchise, new motor vehicle, and independent/used motor vehicle 
dealers.\508\ As discussed in the Paperwork Reduction Act analysis in 
SBP III.V, the Commission received comments from SBA Advocacy and 
others on this estimate, and the Commission has responded to those 
comments by making certain changes to the proposal in light of the 
comments received. The Commission has revised its estimate of covered 
dealers to 47,271 franchise, new motor vehicle, and independent/used 
motor vehicle dealers based on newly available NAICS data assembled by 
the U.S. Census Bureau.\509\
---------------------------------------------------------------------------

    \508\ Id. at 42035. The Commission explained that, because of 
the relative size of the automobile market compared to other types 
of motor vehicle dealers, and the greater availability of relevant 
information for this market, its NPRM analysis exclusively 
considered automobile dealers. The Commission invited submissions of 
market information for other types of motor vehicles such as boats, 
RVs, and motorcycles that would allow expansion of the scope of its 
analysis. See NPRM at 42035-36.
    \509\ U.S. Census Bureau, ``All Sectors: County Business 
Patterns, Including ZIP Code Business Patterns, by Legal Form of 
Organization and Employment Size Class for the U.S., States, and 
Selected Geographies: 2021,'' https://data.census.gov/
table?q=CB2100CBP&n=44111:44112&tid=CBP2021.CB2100CBP&nkd=EMPSZES~001
,LFO~001 (listing 21,622 establishments for ``[n]ew car dealers,'' 
NAICS code 44111, and 25,649 establishments for ``[u]sed car 
dealers,'' NAICS code 44112).
---------------------------------------------------------------------------

    Regarding the estimate of the number of small entities affected by 
the Final Rule, as noted in the Certification of the Final Rule,\510\ 
while the Commission cannot determine the precise number of small 
entities, the data the Commission does have reinforce the Commission's 
initial view that most covered entities are small entities.
---------------------------------------------------------------------------

    \510\ See SBP VI.A.2.
---------------------------------------------------------------------------

(d) Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements of the Proposed Rule
    An industry association commenter argued that the Commission did 
not ``accurately'' lay out the proposed rule's projected requirements. 
The commenter did not provide an explanation of what it alleged to be 
inaccurate in the Commission's description. This comment 
notwithstanding, the NPRM described the proposed rule's projected 
requirements, including by elaborating on the proposed recordkeeping 
requirements and providing estimates regarding the anticipated 
recordkeeping time and resource obligations for programmers, clerical 
staff, sales managers, and compliance officers.\511\ The NPRM also 
provided a detailed description of the recordkeeping requirements for 
entities to be covered by the Rule.\512\
---------------------------------------------------------------------------

    \511\ NPRM at 42035; see also id. at 42033-34 (describing 
recordkeeping requirements and analyzing cost burden). To avoid 
duplicative or unnecessary analysis, the information required by the 
IRFA can be provided with or as part of any other analysis required 
by any other law. 5 U.S.C. 605(a).
    \512\ See NPRM at 42027, 42035 (enumerating records to be 
retained and time period for retention).
---------------------------------------------------------------------------

(e) Duplicative, Overlapping, or Conflicting Federal Rules
    An industry association commenter argued that the Commission failed 
to identify relevant Federal rules that may duplicate, overlap, or 
conflict with the proposal. This commenter's arguments that the 
proposed rule conflicts with Federal statutes are addressed in the 
section-by-section analysis in SBP III. Commenters provided no examples 
of actual conflicts between the proposals and Federal law. Further, 
there is no evidence that duplicative laws prohibiting 
misrepresentations or unfair acts or practices have harmed consumers or 
competition. Moreover, the additional remedies provided by the Final 
Rule will benefit consumers who encounter conduct that is already 
illegal and will assist law-abiding dealers that presently lose 
business to competitors that act unlawfully.
(f) Description of Any Significant Alternatives to the Proposed Rule 
Which Accomplish the Stated Objectives of Applicable Statutes and Which 
Minimize Any Significant Economic Impact of the Proposed Rule on Small 
Entities
    Statutory examples of ``significant alternatives'' include 
different requirements or timetables that take into account the 
resources available to small entities; the clarification, 
consolidation, or simplification of compliance and reporting 
requirements under the Rule for small entities; the use of performance 
rather than design standards; and an exemption from coverage of the 
Rule, or any part thereof, for small entities.\513\ Comments from SBA 
Advocacy and from a national industry association argued that the 
Commission did not set forth alternatives to the proposed rule.\514\
---------------------------------------------------------------------------

    \513\ See 5 U.S.C. 603(c)(1)-(4).
    \514\ Comment of SBA Advocacy, Doc. No. FTC-2022-0046-6664.
---------------------------------------------------------------------------

    In its Regulatory Flexibility Act compliance guidance to Federal 
agencies, the SBA Office of Advocacy provides that, ``[i]f an agency is 
unable to analyze small business alternatives separately, then 
alternatives that reduce the impact for businesses of all sizes must be 
considered.'' \515\ As the

[[Page 671]]

Commission explained in its NPRM, it ``envisioned and drafted this Rule 
mindful that most motor vehicle dealers are small entities,'' and 
drafted its proposal in the first instance to minimize economic impact 
on all motor vehicle dealers.\516\ For example, the Rule prohibits 
conduct that already violates the FTC Act, but still takes steps to 
minimize burdens for dealers of all sizes, by, for example, allowing 
records to be kept in any legible form already kept in the ordinary 
course of business, and by limiting recordkeeping requirements to 
twenty-four months from the date the record is created despite the fact 
that motor vehicle financing terms are generally years longer than this 
period. Commenters generally appear to understand the relevant market 
in a similar manner. For instance, the possible alternatives raised by 
the comment from SBA Advocacy would apply uniformly to both large and 
small businesses. These alternatives included excluding vehicle dealers 
that do not sell automobiles, regardless of the size of the dealer, and 
creating a carve-out for banks and other financing companies that would 
cover multi-billion dollar institutions.\517\ Comments from SBA 
Advocacy and a national industry association also discussed the 
proposed rule's disclosure requirements in an industry-wide manner, not 
limiting their comments to businesses under any particular size 
threshold.\518\ Nevertheless, the Commission has reviewed these 
comments carefully, has responded to comments on alternatives in the 
corresponding sections of its section-by-section analysis, and has 
determined to modify the definition of ``Covered Motor Vehicle'' at 
Sec.  463.2(e) and not to finalize the requirements proposed in 
Sec. Sec.  463.4(b) and 463.5(b).\519\
---------------------------------------------------------------------------

    \515\ Off. of Advoc., U.S. Small Bus. Admin., ``A Guide for 
Government Agencies: How to Comply with the Regulatory Flexibility 
Act'' 39 (2017), https://advocacy.sba.gov/wp-content/uploads/2019/06/How-to-Comply-with-the-RFA.pdf.
    \516\ NPRM at 42036-37; see also id. at 42029-30 (indicating, in 
Questions for Comment 26.b, 28.a, & 30 that the Commission was 
considering alternative approaches).
    \517\ See Comment of SBA Advocacy, Doc. No. FTC-2022-0046-6664 
at 4-6. As addressed in SBP III.C.2(a) and SBP III.E.2(c), in 
responding to a similar comment by financial institutions, the Final 
Rule does not change the status quo regarding the responsibilities 
of contract assignees or other subsequent holders of motor vehicle 
financing under the Holder Rule, and the Commission declines to 
create a safe harbor for contract assignees where it did not 
previously exist.
    Similarly, one comment recommended that the Commission add a 
rule provision authorizing an alternative compliance mechanism, 
stating that such a provision would aid not just smaller entities 
but larger entities as well. Under this alternative mechanism, 
independent accountability organizations could apply to the 
Commission for authorization to review and assess auto dealers' 
adherence to a set of rule compliance guidelines that would be 
created. See Comment of BBB Nat'l Programs, Doc. No. FTC-2022-0046-
8452 at 1-3. This comment suggested that such an alternative 
compliance mechanism would have several benefits, including 
educating industry participants and allowing for industry oversight 
beyond the capacity of the FTC. The Commission agrees with the goals 
of educating stakeholders and maximizing resources used to ensure 
compliance with the Rule but notes that these goals can be furthered 
without adding alternate mechanisms with as-yet unknown guidelines, 
that may or may not be sufficient to protect consumers, to the Rule 
that the Commission is finalizing. The Commission notes that the 
Rule finalizes certain baseline protections that should already be 
in place under the law. The Commission encourages stakeholders, such 
as auto dealer trade associations, BBB, and others, to educate their 
members and the public about the Rule and encourage compliance, as 
such groups have done when issuing guidance on other aspects of the 
law.
    \518\ Comment of SBA Advocacy, Doc. No. FTC-2022-0046-6664 at 5-
6; see generally Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-
2022-0046-8368. The National Automobile Dealers Association also 
argues that the Commission should have considered whether to do a 
rule in the first instance. The NPRM provides a detailed explanation 
of why, more than a decade after Congress granted the FTC APA 
rulemaking authority with respect to motor vehicle dealers, and 
continued enforcement, outreach, and other initiatives, a rule is 
needed to address ongoing problems related to bait-and-switch 
tactics and hidden charges.
    \519\ Separately, the Commission notes that the NPRM identified 
and solicited comments on alternatives to every substantive 
requirement, including the areas specifically addressed by the 
commenters. See, e.g., NPRM at 42028-30 (Q4-7, Q10, Q16, Q28, Q33, 
Q36-38); id. at 42040-41.
---------------------------------------------------------------------------

2. Final Regulatory Flexibility Analysis
    Although the Commission is certifying that the Rule will not have a 
significant economic impact on a substantial number of small entities, 
the Commission has prepared the following FRFA with this Final Rule. In 
the following paragraphs, the Commission provides the information 
required for a FRFA: (1) a statement of the need for, and objectives 
of, the Rule; (2) a statement of the significant issues raised by 
public comments in response to the IRFA, including any comments filed 
by the Chief Counsel for Advocacy of the Small Business Administration 
in response to the proposed rule, the Commission's assessment and 
response, and any resulting changes; (3) a description of and an 
estimate of the number of small entities to which the Rule will apply 
or an explanation of why no such estimate is available; (4) a 
description of the projected reporting, recordkeeping, and other 
compliance requirements; and (5) a description of the steps the agency 
has taken to minimize the significant economic impact on small entities 
consistent with the stated objectives of applicable statutes, including 
a discussion of any significant alternatives for small entities.\520\
---------------------------------------------------------------------------

    \520\ 5 U.S.C. 604(a)(1)-(6).
---------------------------------------------------------------------------

(a) Statement of the Need for, and Objectives of, the Rule
    The FTC issues this Final Rule to address deceptive and unfair acts 
or practices during the vehicle buying or leasing process, and to 
provide an additional enforcement tool to remedy consumer harm and 
assist law-abiding dealers. As detailed in SBP II.B.1, these deceptive 
and unfair practices include bait-and-switch tactics, such as dealers 
advertising deceptively low prices or other deceptive terms to induce 
consumers to visit the dealership, and charging such consumers 
additional, unexpected amounts, including after the consumers have 
invested significant time and effort traveling to, and negotiating at, 
the dealership premises. At present, consumers may never learn that 
they are paying substantial unexpected charges, given the complexity 
and length of the motor vehicle sale, financing, or lease transaction 
and its attendant contracts and other documents. Law enforcement, 
outreach and other engagement in this area, as well as the number of 
consumer complaints each year regarding motor vehicle dealer practices, 
indicate that unlawful conduct persists despite Federal and State law 
enforcement efforts.
(b) Issues Raised by Comments, Including Comments by the Chief Counsel 
for Advocacy of the SBA, the Commission's Assessment and Response, and 
Any Changes Made as a Result
    The comments regarding the IRFA are addressed in SBP VI.B, and the 
comments regarding the other provisions of the NPRM are discussed in 
the SBP's section-by-section analysis in SBP III. As noted, the 
Commission has made certain changes to the Rule after carefully 
reviewing the comments. These changes include modification of the 
definition of ``Covered Motor Vehicle'' at Sec.  463.2(e), removal of 
the add-on list disclosure requirement in proposed Sec.  463.4(b) and 
the requirements in proposed Sec.  463.5(b), and removal of the 
corresponding recordkeeping requirements in proposed Sec.  463.6(a)(2) 
and (a)(4).
(c) Description and Estimate of the Number of Small Entities to Which 
the Final Rule Will Apply or an Explanation of Why No Such Estimate Is 
Available
    The Final Rule applies to covered motor vehicle dealers, as defined 
in Sec.  463.2(f), of covered motor vehicles at Sec.  463.2(e): ``any 
self-propelled vehicle designed for transporting persons or property on 
a public street, highway, or

[[Page 672]]

road,'' and, in light of comments received, excludes specific 
categories as detailed in Sec.  463.2(e).\521\ As explained in the 
Certification,\522\ the Commission cannot determine the precise number 
of small entities to which the Final Rule applies, but census data 
indicate that the vast majority of the estimated 47,271 dealers covered 
by the Rule are small entities according to the applicable U.S. Small 
Business Administrator's relevant size standards.
---------------------------------------------------------------------------

    \521\ The Commission is authorized to prescribe rules with 
respect to a motor vehicle dealer that is predominantly engaged in 
the sale and servicing of motor vehicles, the leasing and servicing 
of motor vehicles, or both, as defined in 12 U.S.C. 5519(a).
    \522\ See SBP VI.A.2.
---------------------------------------------------------------------------

(d) Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    The Final Rule prohibits certain unfair or deceptive acts or 
practices and contains recordkeeping requirements. The Final Rule 
contains no reporting requirements.
    The Final Rule requires covered motor vehicle dealers to clearly 
and conspicuously disclose the offering price of a vehicle in certain 
advertisements and in response to consumer communications. It also 
requires dealers to make certain other disclosures during the sale, 
financing, or leasing process. To enforce the Rule and prevent the 
unfair or deceptive practices prohibited by the Rule, the Rule further 
requires dealers to retain records necessary to demonstrate compliance 
with the Rule. Such records include advertising materials and copies of 
purchase orders and financing and lease documents. The Rule requires 
such records to be retained for a period of twenty-four months from the 
date they are created and provides that they may be kept in any legible 
form, and in the same manner, format, or place as they may already be 
kept in the ordinary course of business. Further details on these 
provisions are discussed throughout this SBP, including in the section-
by-section analysis of the recordkeeping requirements in Sec.  463.6, 
as well as in the preceding Paperwork Reduction Act analysis.
(e) Description of the Steps the Commission Has Taken To Minimize the 
Significant Economic Impact on Small Entities Consistent With the 
Stated Objectives of Applicable Statutes
    The Final Rule addresses certain unfair or deceptive acts or 
practices in motor vehicle sales, financing, and leasing. In drafting 
its NPRM, reviewing public comments, and modifying the Rule from its 
original proposal, the Commission has taken specific steps to avoid 
unduly burdensome requirements for small entities. The Commission 
believes that the Final Rule--including the prohibitions against making 
specific misrepresentations and against charging consumers for any item 
unless the dealer obtains the express, informed consent of the consumer 
for the charge--is necessary to protect consumers, including small-
business consumers that purchase, finance, or lease motor vehicles. By 
addressing these practices, the Rule also will benefit competition by 
preventing law-abiding dealers, many of which are small businesses, 
from losing business due to unlawful practices by other dealers.
    For each provision in the Rule, the Commission has attempted to 
reduce the burden on businesses, including small entities. For example, 
the Commission limited the number of disclosures that dealers are 
required to make under the Final Rule, and in response to comments, 
further limited such disclosures by determining not to finalize the 
disclosures in proposed Sec. Sec.  463.4(b) and 463.5(b). Similarly, 
the Commission has limited the duration of the Rule's recordkeeping 
requirements to twenty-four months from the date the relevant record is 
created, even though this period is far shorter than the length of many 
financing contracts.
    As previously noted, the Commission does not believe the Final Rule 
imposes a significant economic impact on a substantial number of small 
entities. Nonetheless, the Commission has taken care to avoid extensive 
requirements related to form. For example, the Commission does not 
specify the form in which records required by the Final Rule must be 
kept. Moreover, the Rule's disclosure requirements do not mandate 
specific font sizes. In sum, the Commission has worked to minimize any 
significant economic impact on small businesses.

VII. Final Regulatory Analysis Under Section 22 of the FTC Act

A. Introduction

    The Federal Trade Commission (FTC) is finalizing a Rule to address 
unfair or deceptive acts or practices by covered motor vehicle dealers 
when engaging with consumers who are shopping for covered motor 
vehicles. The Rule contains several provisions targeted at addressing 
price-related deception and unfairness for consumers with respect to 
purchasing, leasing, and financing new and used motor vehicles. The 
Final Rule prohibits misrepresentations regarding material information 
about certain aspects of motor vehicles and motor vehicle financing. 
The Final Rule also mandates certain disclosures about vehicle price, 
payments, and add-ons, while prohibiting charges for add-on products 
and services that would not benefit the consumer or for any item unless 
the dealer obtains the express, informed consent of the consumer for 
the charge.
    Section 22 of the FTC Act, 15 U.S.C. 57b-3, requires the Commission 
to issue a final regulatory analysis when publishing a final rule. The 
final regulatory analysis must contain (1) a concise statement of the 
need for, and objectives of, the final rule; (2) a description of any 
alternatives to the final rule which were considered by the Commission; 
(3) an analysis of the projected benefits, any adverse economic 
effects, and any other effects of the final rule; (4) an explanation of 
the reasons for the determination of the Commission that the final rule 
will attain its objectives in a manner consistent with applicable law 
and the reasons the particular alternative was chosen; and (5) a 
summary of any significant issues raised by the comments submitted 
during the public comment period in response to the preliminary 
regulatory analysis, and a summary of the assessment by the Commission 
of such issues.
    As discussed previously, the FTC issues this Final Rule to address 
deceptive and unfair acts or practices during the vehicle buying or 
leasing process, and to provide an additional enforcement tool to 
remedy consumer harm and assist law-abiding dealers. These deceptive 
and unfair practices include bait-and-switch tactics, such as dealers 
advertising deceptively low prices or other deceptive terms to induce 
consumers to visit the dealership; and charging such consumers 
additional, unexpected amounts, including after the consumers have 
invested significant time and effort traveling to, and negotiating at, 
the dealership premises. At present, consumers may never learn that 
they are paying substantial unexpected charges, given the complexity 
and length of the motor vehicle sale, financing, or lease transaction 
and its attendant contracts and other documents. Law enforcement, 
outreach, and other engagement in this area, as well as the number of 
consumer complaints each year regarding motor vehicle dealer practices, 
indicate that unlawful conduct persists despite Federal and State law 
enforcement efforts.
    In response to public comments, the Commission considered and made 
a number of revisions from the proposed

[[Page 673]]

rule, which in turn have necessitated revisions to the regulatory 
analysis, resulting in this final regulatory analysis.\523\ The most 
significant revisions to the proposed rule impacting the regulatory 
analysis are the removal of proposed Sec. Sec.  463.4(b) (requiring the 
disclosure of add-on lists) and 463.5(b) (requiring various itemized 
disclosures relating to undisclosed or unselected add-ons). As a result 
of the Commission's determination not to finalize these sections of the 
proposed rule, costs and benefits associated with those provisions have 
been excluded from the final regulatory analysis. The Commission also 
has made revisions in response to public comments, the availability of 
newer data, the identification of additional relevant data, and the 
application of newer scholarly research. The final regulatory analysis 
thus builds upon the preliminary regulatory analysis, while 
incorporating several updates:
---------------------------------------------------------------------------

    \523\ These revisions and alternatives the Commission considered 
are described in detail in the Commission's Statement of Basis and 
Purpose, as is the Commission's explanation why the Final Rule will 
attain its objectives in a manner consistent with applicable law.
---------------------------------------------------------------------------

    <bullet> The analysis of consumer time savings has been revised in 
response to public comments and changes following the NPRM.
    <bullet> A section quantifying the reduction in deadweight loss 
resulting from the Rule has been added, based upon recent research that 
allows the Commission to quantify both how dealer markups will respond 
to price transparency and how new and used vehicle quantities will 
respond to changes in price.
    <bullet> Training costs have been added for some provisions in 
response to public comments.
    <bullet> Information systems costs have been added to the 
Recordkeeping section in response to public comments, based on 
estimates of how much data would be required and the cost of cloud or 
on-premises data storage.
    <bullet> Wages used to monetize labor costs have been updated to 
reflect new data from the Bureau of Labor Statistics.
    <bullet> The number of dealers has been updated to reflect new data 
from Census County Business Patterns.
    <bullet> The number of transactions subject to the Rule has been 
revised in response to public comments, and the Commission's 
identification of additional data sources that can be used to exclude 
private party and fleet transactions.
    The Final Rule contains requirements in the following areas:
    1. Prohibited misrepresentations;
    2. Required disclosure of offering price in certain advertisements 
and in response to inquiry;
    3. Required disclosure of total of payments for financing and 
leasing transactions;
    4. Prohibition on charging for add-ons in certain circumstances;
    5. Requirement to obtain express, informed consent before any 
charges; and
    6. Recordkeeping.
    In the following analysis, we describe the anticipated impacts of 
the Final Rule. Where possible, we quantify the benefits and costs and 
present them separately by provision. If a benefit or cost is 
quantified, we indicate the sources of the data relied upon. If an 
assumption is needed, the text makes clear which quantities are being 
assumed.
    A period of 10 years is used in the baseline scenario because FTC 
rules are generally subject to review every 10 years.\524\ Quantifiable 
aggregate benefits and costs across three different sets of assumptions 
are summarized as the net present value over this 10-year time frame in 
Table 1.1. Quantifiable benefits include time savings from a more 
efficient shopping and sales process and a reduction in deadweight 
loss, both of which ultimately result from greater transparency under 
the Rule. Quantifiable costs primarily reflect the resources expended 
by automobile dealers in developing the systems necessary to comply 
with the provisions of the Rule. In addition, we expect additional 
benefits and costs that we are presently unable to quantify. Among the 
unquantified benefits are time savings that accrue to individuals who 
abandon vehicle transactions entirely; additional time savings on 
activities that individuals engage in digitally under the status quo; 
reductions in deadweight loss resulting from direct price effects in 
the markets for used vehicles or vehicle add-ons; and the benefit of 
reduced stress, discomfort, and unpleasantness experienced by motor 
vehicle consumers under the status quo. Among the unquantified costs 
would be any potential reductions in consumer information resulting 
from changes in dealers' policies regarding marketing and 
advertisements. The discount rate reflects society's preference for 
receiving benefits earlier rather than later; a higher discount rate is 
associated with a greater preference for benefits in the present. The 
present value is obtained by multiplying each year's net benefit by a 
discount factor a number of times equal to the number of years in the 
future the net benefit accrues.\525\
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    \524\ See Fed. Trade Comm'n, Notification of Intent to Request 
Public Comment, Regulatory Review Schedule, 87 FR 47947 (Aug. 5, 
2022), https://www.govinfo.gov/content/pkg/FR-2022-08-05/pdf/2022-16863.pdf.
    \525\ While whole calendar years are used here for ease of 
reference, this analysis estimates costs and benefits over a ten-
year period running from the Rule's effective date. For the purposes 
of discounting, the Commission assumes that any upfront costs or 
benefits occur immediately upon the effective date of the Rule and 
are therefore not discounted. The Commission further assumes that 
ongoing costs and benefits occur at the end of each period, such 
that even ongoing costs/benefits that occur in year 1 are 
discounted.

                                            Table 1.1--Present Value of Net Benefits (in Millions), 2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Low estimate                      Base case                     High estimate
                                                         -----------------------------------------------------------------------------------------------
                                                            3% Discount     7% Discount     3% Discount     7% Discount     3% Discount     7% Discount
                                                               rate            rate            rate            rate            rate            rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
    Time Savings........................................          $7,463          $6,145         $14,926         $12,290         $24,036         $19,790
    Deadweight Loss Reduction...........................             568             468           1,298           1,069           2,307           1,899
                                                         -----------------------------------------------------------------------------------------------
        Total Benefits..................................           8,031           6,613          16,224          13,359          26,343          21,690
Costs:
    Finance/Lease Total of Payments Disclosure..........             296             246             296             246             117              98
    Offering Price Disclosure...........................              46              46              46              46               0               0
    Prohibition re: Certain Add-ons & Express, Informed              475             406             475             406             147             128
     Consent............................................

[[Page 674]]

 
    Prohibition on Misrepresentations...................             157             130             157             130               0               0
    Recordkeeping.......................................             296             248             296             248             296             248
                                                         -----------------------------------------------------------------------------------------------
        Total Costs.....................................           1,270           1,075           1,270           1,075             559             474
                                                         -----------------------------------------------------------------------------------------------
        Net Benefits....................................           6,761           5,538          14,954          12,284          25,784          21,216
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: ``Low Estimate'' reflects all lowest benefit estimates and high cost scenarios and ``High Estimate'' reflects all highest benefit estimates and
  low cost scenarios. ``Base Case'' reflects base case benefit estimates and high cost scenarios. Not all impacts can be quantified; estimates only
  reflect quantified costs and benefits.

B. Estimated Benefits of Final Rule

    In this section, we describe the beneficial impacts of the Rule, by 
(1) providing quantitative estimates where possible, (2) identifying 
quantitative benefits that cannot be estimated at this time due to a 
lack of data, and (3) describing benefits that can only be assessed 
qualitatively. The benefits cut across multiple areas addressed by the 
Rule and these benefits are impossible to identify separately by area. 
As a result, we enumerate the benefits of the Rule not by provision, 
but by category.
1. Consumer Time Savings When Shopping for Motor Vehicles
    Several provisions of the Rule would benefit consumers by saving 
them time as they complete motor vehicle transactions. Required 
disclosures of relevant prices and prohibitions of misrepresentations, 
inter alia, would save consumers time when shopping for a vehicle by 
requiring the provision of salient, material information early in the 
process and eliminating time spent pursuing misleading offers. The 
Commission's enforcement record shows that consumer search and shopping 
is sometimes influenced by unfair or deceptive advertising that draws 
consumers to a dealership in pursuit of an advertised deal, only to 
find out at some point later in the process (if at all) that the 
advertised deal is not actually available to them.\526\ This bait-and-
switch advertising has the effect of wasting consumers' time traveling 
to and negotiating with unscrupulous dealerships, time which would 
otherwise be spent pursuing truthful offers in the absence of deception 
and unfairness. If consumers are faced with hard constraints on their 
time or other resources, this wasted time may mean that they are unable 
to find the deal that best fits their needs and preferences. 
Additionally, motor vehicle consumers frequently begin the process of 
shopping for a motor vehicle (e.g., by visiting a dealership in 
response to an ad or initiating negotiations in response to a quoted 
price that is incomplete) and then later abandon the nascent 
transaction entirely when additional information is revealed. In these 
instances, consumers do not purchase or lease a vehicle at all. The 
Rule would also save consumers time by avoiding these abandoned 
transactions. However, because the Commission has been unable to 
identify data to determine the quantity of such abandoned transactions 
and the amount of time spent pursuing them, this benefit remains 
unquantified in the analysis.
---------------------------------------------------------------------------

    \526\ See SBP II.B-C.
---------------------------------------------------------------------------

    Obviously, many consumers end up purchasing and leasing vehicles 
under the status quo--either because full revelation of prices and 
terms still results in a mutually beneficial transaction or because 
full revelation never occurs and consumers are deceived into completing 
a transaction that is not mutually beneficial. These consumers also 
spend additional, unnecessary time discovering information that dealers 
would be required to disclose earlier once the Rule is in effect. The 
Commission expects the Rule's required disclosures and prohibitions 
against misrepresentations to improve information flows and consumer 
search efficiency, including but not limited to, addressing the 
influence of deception and unfairness on consumer search and shopping 
behavior.
    The Commission's preliminary analysis estimated that the proposed 
rule would allow consumers to spend 3 fewer hours completing each motor 
vehicle transaction and result in (quantifiable) overall time savings 
valued at between $30 billion and $35 billion. In this final regulatory 
analysis, the Commission takes into account the effects of revisions to 
the proposed rule and additional data, addresses industry comments, and 
employs an alternative analytical approach with a sensitivity analysis. 
This sensitivity analysis reflects a ``high-end'' estimate that 
consumers will save as many as 3.3 hours per completed transaction; a 
``base case'' estimate--representing the most likely scenario--that 
consumers will save 2.05 hours per transaction; and a possible ``low-
end'' savings estimate of 1.02 hours. Using a 7% discount rate, these 
time savings estimates result in a range of between $6.1 billion and 
$19.8 billion in total savings, with a base case of $12.3 billion.
    In its preliminary analysis, the Commission relied on results from 
the 2020 Cox Automotive Car Buyer Journey study, which showed that 
consumers spent roughly 15 hours researching, shopping, and visiting 
dealerships for each motor vehicle transaction.\527\ Based on the 
proposed rule provisions prohibiting misrepresentations and requiring 
price transparency, the Commission assumed each consumer who 
consummated a vehicle transaction would spend 3 fewer hours shopping 
online, corresponding with dealerships, visiting dealer locations, and 
negotiating with dealer employees. The 3 hours corresponded to 20% of 
an average consumer's time spent on such activities in 2019 (pre-
COVID).
---------------------------------------------------------------------------

    \527\ NPRM at 42037 & n.180.
---------------------------------------------------------------------------

    The Commission received a number of comments emphasizing the 
unnecessary time consumers must spend to ascertain the price and terms 
when attempting to consummate a vehicle transaction. One group of 
commenters, for example, asserted that ``[t]he most important factor 
for consumers purchasing a vehicle is its price, yet the price is 
almost impossible to ascertain without spending hours at the 
dealership.'' \528\ Another group of commenters provided a compilation 
of numerous consumer complaints, including many that described 
consumers spending hours at a

[[Page 675]]

dealership trying to ascertain the final price and terms of the 
transaction.\529\ The improved information flow under the Final Rule 
will provide quantifiable benefits for consumers by reducing or 
eliminating this unnecessary need to spend time penetrating opaque 
pricing and terms, and will provide qualitative benefits by reducing 
frustration and stress in the car buying process.
---------------------------------------------------------------------------

    \528\ Comment of Am. for Fin. Reform et al., Doc. No. FTC-2022-
0046-7607.
    \529\ Comment of Consumer Reps. et al., Doc. No. FTC-2022-0046-
7520 at 3, 11, 12, 16, 38 (including story from Illinois consumer 
describing ``[spending] about 4 hours at the dealership while the 
salesman kept changing the terms of the deal . . . .''; story from 
Connecticut consumer describing how, ``[a]fter nearly three hours of 
paperwork . . . I was finally presented with the official bill to 
pay the balance. The price was now higher than the original adjusted 
sticker.''; story from New Jersey consumer describing how, ``[a]fter 
4 hours of negotiations . . . I finally got nearly the same price as 
the verified offer [for the vehicle] but about $1000 less on my 
trade-in[ ] (that was also part of the verified offer). The [dealer] 
also added on Accessories `other products' [of] $474.00 . . . .''; 
story from Texas consumer describing how ``[t]he [dealership] 
finance manager kept me there for two hours, and said the deal was 
done. I went to get my wife, when we got back the price had gone up 
$3,000.00.'').
---------------------------------------------------------------------------

    Some industry commenters questioned the appropriateness of the data 
and assumptions used to quantify the time savings benefit. A number of 
industry association commenters argued that the 15-hour figure did not 
represent a reasonable base from which time savings attributable to the 
Rule could be derived. One such commenter criticism asserted that the 
publication from which it was sourced only surveyed consumers who used 
the internet during research and shopping and therefore could not be 
representative of the time spent by consumers who do not use the 
internet. Still other commenters noted that additional data from the 
same organization were available. The Commission disagrees that the 15-
hour estimate is an unreasonable base from which to derive time savings 
from the Rule. While the Cox Automotive Study acknowledges only 
internet users were surveyed, the study also indicates its ``[r]esults 
are weighted to be representative of the buyer population.'' \530\ 
Also, while more recent data were available at the time of the analysis 
for the NPRM, those data were from an extraordinary period (the COVID-
19 pandemic). The Commission expects that the data used for the 
preliminary analysis are more representative of consumer experiences 
over the analysis window than the more recent data. While not 
dispositive, the limited data available since the NPRM was published 
bears this hypothesis out. In the 2021 Cox Automotive Car Buyer Journey 
Study, consumers spent roughly 12-and-a-half hours researching, 
shopping, and visiting dealerships for each motor vehicle 
transaction.\531\ In contrast, in the 2022 Car Buyer Journey study, 
consumers spent roughly 14-and-a-half hours researching, shopping, and 
visiting dealerships for each motor vehicle transaction.\532\ This 
admittedly short trend suggests that the COVID-19 pandemic had a 
significant effect on motor vehicle shopping, reducing the amount of 
time the typical consumer spent on these activities, and that time 
spent on these activities has already rebounded to previous 
levels.\533\
---------------------------------------------------------------------------

    \530\ 2020 Cox Automotive Car Buyer Journey, supra note 25, at 
1.
    \531\ See 2021 Cox Automotive Car Buyer Journey Study, supra 
note 504, at 16.
    \532\ See 2022 Car Buyer Journey, supra note 25, at 6.
    \533\ Interestingly, consumer satisfaction with the car buying 
process, as measured by this same survey, was highest during the 
COVID-19 pandemic when the time spent on research, shopping, and 
visiting dealerships was lowest, and has since dropped back to pre-
pandemic levels. 2022 Car Buyer Journey, supra note 25, at 5.
---------------------------------------------------------------------------

    Another industry association commenter suggested that the figure 
included categories of time use that could not conceivably be affected 
by the proposed rule, such as online research into vehicle features, 
and that attention should be restricted to time spent shopping. The 
Commission finds that several provisions in the Rule clearly have the 
potential to reduce time spent across most categories covered by the 
15-hour figure, including the largest category (``Researching and 
Shopping Online''). This category of time use would include comparing 
listed vehicle prices across dealerships that, under the Rule, would be 
transparent and comparable in a way that they were not in the status 
quo, thus saving consumers time.
    Some commenters also noted that the total base of transactions 
reported in the preliminary analysis appeared to overstate the number 
of transactions to which the proposed rule would apply. First, 
commenters asserted that the 62.1 million transactions double-counted 
new vehicle leases in the data source from which it was obtained (2019 
National Transportation Statistics, Table 1-17). Second, commenters 
asserted that the number included private party transactions that would 
be entirely unaffected by the proposed rule. Finally, commenters argued 
that the transactions number contained wholesale and fleet 
transactions, where the amount of time spent researching, shopping, and 
visiting dealers is likely to be substantially different relative to a 
household consumer.
    The Commission has verified that the source data were revised to 
fix the erroneous double-counting of leases between the time they were 
accessed by the Commission for the drafting of the preliminary analysis 
and the time that comments were received. The final analysis uses the 
revised data. In addition, in response to comments that private party 
transactions should be excluded from the analysis, the Commission is 
revising its analysis. Additional data would be necessary to quantify 
any time savings benefits for wholesale and fleet transactions. 
Accordingly, the Commission has excluded all transactions occurring 
through non-retail channels from the final analysis.\534\
---------------------------------------------------------------------------

    \534\ When the transaction volume from the preliminary analysis 
is applied to the Commission's current methodology and sensitivity 
analysis, time savings under the Final Rule ranges from a high-end 
of $35 billion to a low-end of $11 billion, with a base case of $22 
billion (assuming a 7% discount rate). In comparison, the 
preliminary analysis computed savings under the proposed rule as 
approximately $31 billion (also assuming a 7% discount rate). The 
residual difference in base case savings is attributable to less 
time saved per transaction--partially explained by additional 
provisions in the NPRM that the Commission is not finalizing--as 
well as updates to the underlying wages used to monetize the 
consumer time savings.
---------------------------------------------------------------------------

    A number of comments raised concerns about the foundations of the 
3-hour time-savings assumption. One industry organization noted that 
the Cox Automotive study cited in the NPRM does not itself address the 
proposals in the NPRM (which the survey, of course, predated) and does 
not estimate time savings.\535\ Another organization

[[Page 676]]

expressed confusion as to whether the assumption was intended as a flat 
3-hour time savings or a 20% time savings, asserting that dynamism in 
automotive retailing will likely lead to evolution in the total amount 
of time spent shopping.
---------------------------------------------------------------------------

    \535\ This same organization commissioned a study that was 
recently released asserting the proposed rule would lead to an 
increase in consumer transaction time. This survey, however, had 
numerous methodological shortcomings rendering its results 
unreliable. For example, the survey presented each respondent at the 
outset with a leading statement telling them the rule would impose 
``new duties [that] are expected to create additional monitoring, 
training, forms, and compliance review responsibilities as well as a 
modification of record keeping systems and coordination with outside 
IT and other vendors'' and ``increase the time of a motor vehicle 
transaction, inhibit online sales, limit price disclosures, and 
increase customer confusion and frustration.'' Edgar Faler et al., 
Ctr. for Auto. Rsch., ``Assessment of Costs Associated with the 
Implementation of the Federal Trade Commission Notice of Proposed 
Rulemaking (RIN 2022-14214), CFR part 463'' 34-36 (2023), https://www.cargroup.org/wp-content/uploads/2023/05/CAR-Report_CFR-Part-463_Final_May-2023.pdf (introductory instructions on the survey 
instrument sent to respondents). Moreover, the survey started with a 
sample size of 60 dealers (id. at 7) in an industry with an 
estimated 46,525 dealers, NPRM at 42,031 & n.154, but only 40 
dealers actually completed responses to many key questions (id. at 
29). The survey does not describe how these 40-60 dealers were 
chosen. Although the survey estimates that the proposed rule would 
require consumers to spend additional time on motor vehicle 
transactions, this conclusion is based on the responses of just 40 
dealers and included no consumers. Id. at 29-32. Moreover, the 
survey report attributed much of this estimated increase to proposed 
rule provisions that are not in the Final Rule. Id. at 25.
---------------------------------------------------------------------------

    While the Commission believes its 3-hour time-saving assumption in 
the NPRM remains reasonable, the Commission has conducted additional 
analyses, the results of which demonstrate the positive net benefits of 
the Rule even when applying more conservative assumptions around time 
savings and adjusting for the removal of certain proposed provisions 
from the NPRM.\536\ Using recent figures from Cox Automotive's Car 
Buyer Journey 2019 study, the Commission notes that consumers who do 
various activities in the vehicle buying process digitally (``digital 
consumers'') save time at the dealership relative to those who do not 
(``non-digital consumers'').\537\ The Commission's revised base case 
time savings calculation assumes that only the fraction of consumers 
who are not currently shopping digitally will experience time savings, 
and that these savings will be proportional to the time savings found 
in the Car Buyer Journey 2019 study for digital consumers.\538\ Because 
the Commission expects the provisions of the Rule to emulate some of 
the time-saving features of completing these activities digitally, the 
time savings benefits of the Rule are assumed to be a proportion of the 
time saved by status quo digital consumers, with the proportion 
determined by how closely the status quo digital shopping experience is 
expected to resemble the shopping experience for all consumers once the 
Rule is in effect. Additionally, because these numbers only reflect 
time saved at the dealership of purchase, we assume that these same 
consumers will also save time on these activities to the extent that 
they are initiated at dealerships visited prior to the dealership at 
which they purchase (``non-purchase dealerships''). Based on 2020 data 
from Cox Automotive, the average consumer visits 1 non-purchase 
dealership for each transaction.\539\ Table 2.1 documents both the 
fraction of consumers performing activities digitally under the status 
quo and the time saved at the dealership by these consumers on each 
activity.
---------------------------------------------------------------------------

    \536\ In fact, the sensitivity analysis in Table 2.3 of this 
final regulatory analysis presents a range of reasonable estimates 
for time savings that includes the 3-hour time-saving assumption 
from the preliminary analysis in the NPRM.
    \537\ Cox Auto. et al., ``Car Buyer Journey 2019'' (2019) 
[hereinafter Car Buyer Journey 2019], https://www.coxautoinc.com/wp-content/uploads/2019/06/2019-Car-Buyer-Journey-Study-FINAL-6-11-19.pdf. While Cox Automotive has released subsequent Car Buyer 
Journey studies, none of these subsequent studies quantify time 
savings from shopping digitally. In addition, to the extent that 
shoppers compensate by spending more time at home on these 
activities, these time savings should be reduced to reflect net time 
savings from performing these activities digitally. We believe that 
the nature of performing these activities digitally vs. at the 
dealership suggests these offsets should be small.
    \538\ The 2020 Cox Automotive Digitization of End-to-End Retail 
study reports the fraction of consumers who are already engaging in 
various activities online under the status quo. Cox Auto., 
``Digitization of End-to-End Retail'' (2021) [hereinafter 
Digitization of End-to-End Retail], https://www.coxautoinc.com/wp-content/uploads/2021/01/2020-Digitization-of-End-to-End-Retail-Study-FINAL.pdf. While the activities listed across studies do not 
match perfectly, we map the activity categories to the closest 
corresponding activity in the other study and, in our final 
analysis, exclude from the time savings calculation the percentage 
of transactions corresponding to the fraction of consumers already 
engaging in that activity online. While it is likely that consumers 
shopping digitally under the status quo will also experience some 
additional time savings under the Rule, there is insufficient data 
to estimate this marginal savings and so we leave this benefit 
unquantified in the analysis.
    \539\ 2020 Cox Automotive Car Buyer Journey, supra note 25, at 
15 (noting an average of 2.2 dealerships visited among new car 
buyers).

               Table 2.1--Completing Activities Digitally
------------------------------------------------------------------------
                                                         Time saved at
                                      % of Consumers    dealership (2019
             Activity                 digital (2020         journey)
                                      digitization)        (minutes)
------------------------------------------------------------------------
Negotiating the Purchase Price....                 20                 43
Select F&I Add-Ons................                 18                 33
Discussing and Signing Paperwork..                 13                 45
Get a Trade-In Offer..............                 31                26
------------------------------------------------------------------------
Source: Car Buyer Journey 2019 and Digitization of End-to-End Retail.

    Based on the description of these activities and the anticipated 
effects of the Rule, our base case estimates assume that non-digital 
consumers will save an amount of time negotiating a vehicle purchase 
price equal to the amount of time saved by those negotiating purchase 
price digitally under the status quo (43 minutes). For non-digital 
consumers, it is currently time-consuming to obtain comparable price 
quotes from dealerships. Many dealerships will not initiate price 
negotiations in earnest without a competing price quote in writing, 
which can only be obtained by visiting a dealership for the non-digital 
consumer. Mandating offering price disclosures--which are comparable 
across dealerships by definition--early in the shopping process will 
emulate the price discovery function of negotiating prices online, in 
which comparable price quotes can be obtained (with effort) via 
email.\540\
---------------------------------------------------------------------------

    \540\ Shoppers who negotiate purchase price digitally under the 
status quo will likely also obtain time savings from mandatory 
offering price disclosures, corresponding to the time and effort 
they put into contacting and exchanging email with dealerships. We 
lack sufficient data on the time spent on these activities to 
quantify these benefits, however.
---------------------------------------------------------------------------

    The Commission anticipates that the impact of the Rule on time 
spent selecting F&I add-ons and discussing and signing paperwork will 
be moderate. In our base case estimates, non-digital consumers will 
save an amount of time doing these activities equal to the half the 
amount of time saved by those doing these activities digitally under 
the status quo (33 x 0.5 = 16.5 minutes and 45 x 0.5 = 22.5 minutes, 
respectively). Time saved selecting add-ons flows primarily from the 
prohibitions on various misrepresentations, the mandatory disclosures 
regarding whether add-ons are required, and the prohibition on charging 
for add-ons under certain circumstances.\541\ Time saved discussing and 
signing paperwork also flows from the prohibitions on various 
misrepresentations, several disclosures mandated by the Rule, and the

[[Page 677]]

prohibition on charging for items without express, informed 
consent.\542\ For non-digital consumers, considerable time must be 
spent at the dealership both closely reviewing paperwork (e.g., to 
ensure that unwanted optional add-ons are not being added to the 
transaction; to ensure that the financing terms, including monthly 
payments, total payments, and term length, are as expected; and to 
confirm that terms in the contract generally conform to what was 
discussed) and waiting for sales and F&I staff at the dealership to 
consult with managers and revise paperwork as needed. Digital 
consumers, however, may have access outside the dealership to add-on 
menus where they can select their desired F&I products affirmatively 
without worry that dealership staff will misrepresent the products or 
pressure them into selecting something unwanted. In addition, digital 
consumers may receive and review paperwork before arriving at the 
dealership. This way, any necessary revisions can be performed by the 
dealership asynchronously so that the consumer is free to spend that 
time as they wish instead of being stuck in an F&I office. The noted 
Rule provisions will give consumers confidence that the add-on options 
presented to them are non-deceptive and the contract paperwork they are 
asked to review will not yield any unpleasant surprises. As a result, 
on average they will neither need to engage in such close scrutiny of 
their contract documents, nor spend as much time waiting for dealership 
staff to speak to managers or make changes as the first draft will be 
more likely to conform to their expectations.\543\
---------------------------------------------------------------------------

    \541\ See Sec. Sec.  463.3(a), (b), and (f); 463.4(c); and 
463.5(a) and (c). The Commission notes that time savings would 
likely be higher in this category had it determined to finalize 
proposed Sec.  463.4(b), which would have required disclosure of an 
add-on list.
    \542\ See Sec. Sec.  463.3; 463.4(c), (d), and (e); and Sec.  
463.5(c).
    \543\ Again, status quo digital shoppers will likely obtain time 
savings on these activities as well, to the extent that their 
paperwork will also be less likely to require close scrutiny and 
revisions. We lack sufficient data on the time spent on these 
activities to quantify these benefits, however.
---------------------------------------------------------------------------

    The Commission assumes that the Rule will likely not assist 
consumers much (if at all) in reducing time spent obtaining a trade-in 
offer. In our base case estimates, we assume non-digital consumers will 
not save additional time on obtaining a trade-in offer under the Rule. 
There are various provisions in the Rule that touch trade-in offers 
made by dealerships \544\ and may increase consumer confidence in 
dealer contracts as discussed previously. In addition, trade-in values 
are an important piece of transaction pricing, so greater price 
transparency may save consumers time on the trade-in aspect of 
transactions that involve them. There is a concern, however, that 
dealers may spend more time trying to extract maximum value out of any 
given trade-in opportunity once the Rule is in effect. Because the 
Commission believes that greater transparency in vehicle pricing and 
add-ons will lead to reduced markups on these products (see 
``Reductions in Deadweight Loss''), it is possible that dealers will 
attempt to make up these lost profits by maximizing trade-in margins, 
which may lead to increased time spent on negotiations. Since we do not 
have sufficient data to determine the balance of these two effects, we 
assume in the base case that they offset. In sensitivity analyses where 
we explore alternative assumptions, note that time savings from this 
activity only apply to the roughly 50% (by one estimate) of vehicle 
purchase transactions at dealerships where consumers trade in a 
vehicle.\545\
---------------------------------------------------------------------------

    \544\ See Sec. Sec.  463.3(i) and (j); 463.4(d).
    \545\ See Progressive, ``Consumers embrace online car buying,'' 
http://www.progressive.com/resources/insights/online-car-buying-trends/ (last visited Dec. 5, 2023).
---------------------------------------------------------------------------

    Finally, data from the 2021 Cox Automotive Car Buyer Journey Study 
reveal that consumer time spent at non-purchase dealerships is roughly 
82% of the time spent at the dealership of purchase.\546\ Additionally, 
the average consumer visits 1 non-purchase dealership for each 
transaction, so under the dual assumptions that (1) the proportions of 
time spent at dealerships across these activities is consistent across 
purchase and non-purchase dealerships and (2) the noted time savings 
are constant as a fraction of time spent, we multiply the time savings 
numbers by this ratio to obtain the additional time saved at non-
purchase dealerships.
---------------------------------------------------------------------------

    \546\ See 2021 Cox Automotive Car Buyer Journey Study, supra 
note 504, at 16 (noting total time of 2:09 spent ``Visiting Other 
Dealerships/Sellers'' and total time of 2:37 spent ``With the 
Dealership/Seller Where Purchased'').
---------------------------------------------------------------------------

    Proceeding as in the preliminary analysis, we assume that motor 
vehicle purchase, financing, and lease transactions will be stable at 
the 2019 level of 57.9 million transactions per year.\547\ As discussed 
previously, the final analysis excludes private party, fleet, and 
wholesale transactions. According to Edmunds Automotive Industry Trends 
2020, 19.3% of new vehicle sales in 2019 were fleet sales.\548\ This 
fraction of the 17.1 million new vehicle sales and leases in the data 
are excluded from the analysis. An Automotive News article from January 
2023 (citing data from Cox Automotive) states that 48% of all used 
vehicle sales occurred outside of the retail channel.\549\ As with new 
vehicle sales, this fraction of the 40.8 million used vehicle 
transactions in the data are excluded from the analysis. Adding up the 
covered transactions (35 million) \550\ and applying the time savings 
calculated from the base case assumptions, we anticipate that the Rule 
will generate a total time savings of more than 72 million hours per 
year. According to the Bureau of Labor Statistics Occupational 
Employment Statistics, the average hourly wage of U.S. workers in 2021 
was $29.76, and recent research suggests that individuals living in the 
U.S. value their non-work time at 82% of average hourly earnings.\551\ 
Thus, the value of non-work time for the average U.S. worker would be 
$24.4 per hour. As a result, our final analysis refines the estimate to 
a present value of between $12.3 billion and $14.9 billion as described 
in Table 2.2, which translates to savings of roughly $1.75 billion per 
year.\552\
---------------------------------------------------------------------------

    \547\ See U.S. Dep't. of Transp., Off. of the Sec'y of Transp., 
Bureau of Transp. Stat., ``National Transportation Statistics 2021, 
50th Anniversary Edition'' 21 (2021), https://www.bts.dot.gov/sites/bts.dot.gov/files/2021-12/NTS-50th-complete-11-30-2021.pdf (Table 1-
17).
    \548\ See Edmunds, ``Automotive Industry Trends 2020'' 7 (2020), 
https://static.ed.edmunds-media.com/unversioned/img/industry-center/insights/2020-automotive-trends.pdf.
    \549\ See Auto. News, ``Used-vehicle volume hits lowest mark in 
nearly a decade'' (Jan. 13, 2023), https://www.autonews.com/used-cars/used-car-volume-hits-lowest-mark-nearly-decade (estimating 
19,100,000 of used vehicle sales in the year 2022 occurred within 
the retail channel). The same Automotive News source reports a total 
used vehicle sales number of approximately 40 million for 2019. Id. 
The conclusions of the analysis are robust to using this total 
figure instead.
    \550\ A recent report by the Center for Automotive Research 
estimates that there approximately 43 million non-fleet, non-private 
party sales in 2019 based on privately sourced data. Edgar Faler et 
al., Ctr. for Auto. Rsch., ``Assessment of Costs Associated with the 
Implementation of the Federal Trade Commission Notice of Proposed 
Rulemaking (RIN 2022-14214), CFR part 463'' 5 (2023), https://www.cargroup.org/wp-content/uploads/2023/05/CAR-Report_CFR-Part-463_Final_May-2023.pdf. While this would result in a savings 
estimate approximately 22% higher, the Commission relies on its 
analysis of the publicly available data described herein.
    \551\ Daniel S. Hamermesh, ``What's to Know About Time Use? '' 
30 J. Econ. Survs. 198, 201 (2016), https://onlinelibrary.wiley.com/doi/epdf/10.1111/joes.12107.
    \552\ Note that we assume only one consumer is involved in each 
transaction; to the extent that multiple members of a household may 
visit dealerships for each transaction, these calculations are 
likely to underestimate the total time savings.

[[Page 678]]



Table 2.2--Estimated Benefits of Time Savings for Completed Transactions
------------------------------------------------------------------------
                                                        2024-2033
------------------------------------------------------------------------
    Completed Transactions
------------------------------------------------------------------------
Avg. minutes saved at
 dealership of purchase/other
 dealers (by activity): \a\
    Negotiating the Purchase   ................                    34/28
     Price.
    Select F&I Add-Ons.......  ................                    14/11
    Discussing and Signing     ................                    20/16
     Paperwork.
    Get a Trade-In Offer.....  ................                      0/0
Hours saved per transaction..  ................                     2.05
Number of covered vehicle      ................               34,986,253
 transactions per year \b\.
Value of time for vehicle-     ................                   $24.40
 shopping consumers \c\.
------------------------------------------------------------------------
    Abandoned Transactions                             Unquantified
------------------------------------------------------------------------
Total Quantified Benefits (in  3% discount rate                  $14,926
 millions).
Total Quantified Benefits....  7% discount rate                  $12,290
------------------------------------------------------------------------
Note: Benefits have been discounted to the present at both 3% and 7%
  rates.
\a\ Averages are across all retail transactions; transactions where
  consumers performed activity digitally under the status quo will have
  a time savings of 0 for that activity.
\b\ For total volume, National Transportation Statistics Table 1-17. For
  retail/non-fleet fraction, Edmunds Automotive Industry Trends 2020
  (for new vehicles), supra note 548548, and Cox Automotive via
  Automotive News (for used vehicles), supra note 549549.
\c\ BLS Occupational Employment Statistics (May 2022) and Hamermesh
  (2016).

    Due to the uncertainty surrounding how the Rule will translate into 
time savings for consumers and to which activities it will most 
strongly apply, we explore a range of alternative assumptions regarding 
what fraction of the documented time savings digital consumers 
experience will be received by non-digital consumers under the Rule. In 
our low-end scenario, we assume that the Rule will result in half the 
consumer time savings of the base case. In our high-end scenario, we 
assume that all the time savings experienced by digital consumers under 
the status quo--including time saved getting a trade-in offer--will be 
received by non-digital consumers under the Rule. The low-end 
assumptions correspond to a total time savings of more than 35.85 
million hours per year while the upper bound assumptions correspond to 
a total time savings of more than 115.47 million hours per year. The 
results of this analysis are presented in Table 2.3. Importantly, over 
the whole range of these alternative assumptions we find that benefits 
exceed costs. In fact, holding other benefit and cost estimates 
constant, the time savings generated by the Rule could be de minimis 
and the implied benefits would still exceed the costs. While there are 
some activities in the car buying process that the Rule may not affect 
(e.g., test driving vehicles, etc.), the data discussed suggest that 
there is ample room for the Rule to eliminate unnecessary time across 
various activities. And even though digital consumers spend less time 
on these activities, results across several studies suggest that this 
reduction in time leads to a better experience for consumers.\553\
---------------------------------------------------------------------------

    \553\ See Car Buyer Journey 2019, supra note 537, at 9 
(Consumers who negotiate (88% vs. 64%) and complete paperwork online 
(74% vs. 65%) are more satisfied with their dealership experience.); 
2022 Car Buyer Journey, supra note 25, at 22 (``More [financing] 
steps completed online = higher satisfaction & less time at the 
dealership''); Cox Auto., ``Cox Automotive Car Buyer Journey Study: 
Pandemic Edition'' 22 (2021), https://www.coxautoinc.com/wp-content/uploads/2021/02/Cox-Automotive-Car-Buyer-Journey-Study-Pandemic-Edition-Summary.pdf (``Heavy Digital Buyers were the Most 
Satisfied'').

                                 Table 2.3--Sensitivity Analysis of Time Savings
----------------------------------------------------------------------------------------------------------------
                                                                      Low end        Base case       High end
----------------------------------------------------------------------------------------------------------------
Avg. minutes saved at dealership of
 purchase/other dealers (by activity):
 \a\
    Negotiating the Purchase Price....  ........................           17/14           34/28           34/28
    Selecting F&I Add-Ons.............  ........................             7/6           14/11           27/22
    Discussing and Signing Paperwork..  ........................            10/8           20/16           39/32
    Get a Trade-In Offer..............  ........................             0/0             0/0           18/15
Hours saved per transaction \b\.......  ........................            1.02            2.05             3.3
                                                                 -----------------------------------------------
Total Quantified Benefits (in           3% discount rate........          $7,463         $14,926         $24,036
 millions).
Total Quantified Benefits.............  7% discount rate........          $6,145         $12,290         $19,790
----------------------------------------------------------------------------------------------------------------
Note: Benefits have been discounted to the present at both 3% and 7% rates.
\a\ Averages are across all retail transactions; transactions where consumers performed activity digitally under
  the status quo will have a time savings of 0 for that activity.
\b\ Time savings for ``Get a Trade-In Offer'' assumed to be zero for lease transactions or sales without trade-
  ins (estimated at 50%).

2. Reductions in Deadweight Loss
    The status quo in this industry features consumer search frictions, 
shrouded prices, deception, and obfuscation. As a result, dealers 
likely charge higher prices for a number of products and services than 
could be supported once the Rule is in effect. Recent research suggests 
that when

[[Page 679]]

consumers are able to observe prices for vehicles before visiting 
dealerships--as is intended by the Rule--prices and dealer profits are 
likely to fall.\554\ When not accompanied by changes in quantity (due 
to a fixed supply of the good), price adjustments serve to transfer 
welfare from one side of the market (e.g., dealers) to the other (e.g., 
consumers), which typically have no net effect on the outcome in a 
regulatory analysis.\555\ A decrease in vehicle prices, however, will 
likely also lead to an increase in the number sold as the supply is not 
fixed. As a result, this quantity expansion effect unambiguously 
increases welfare by reducing the deadweight loss that occurs when 
firms can charge prices that are marked up over marginal costs.
---------------------------------------------------------------------------

    \554\ Marco A. Haan et al., ``A Model of Directed Consumer 
Search,'' 61 Int'l J. Indus. Org. 223, 223-55 (2018), https://doi.org/10.1016/j.ijindorg.2018.09.001; Jos[eacute] Luis Moraga-
Gonzalez et al., ``Consumer Search and Prices in the Automobile 
Market.'' 90 Rev. Econ. Stud. 1394-1440 (2023), https://doi.org/10.1093/restud/rdac047.
    \555\ See Off. of Mgmt. & Budget, Exec. Off. of the President, 
``Circular A-4'' 38 (2003), https://www.transportation.gov/sites/dot.gov/files/docs/OMB%20Circular%20No.%20A-4_0.pdf: ``A regulation 
that restricts the supply of a good, causing its price to rise, 
produces a transfer from buyers to sellers. The net reduction in the 
total surplus (consumer plus producer) is a real cost to society, 
but the transfer from buyers to sellers resulting from a higher 
price is not a real cost since the net reduction automatically 
accounts for the transfer from buyers to sellers.'' To the extent 
any price changes caused by the Rule result in transfers to 
consumers from dealers who were in violation of existing laws, such 
transfers would be consistent with the agency's mission of providing 
redress to injured consumers and its history of doing so in 
enforcement actions.
---------------------------------------------------------------------------

3. Framework
    When a policy reduces the price of a good--either through a 
reduction in firm costs or, as in this case, a reduction in firm market 
power--the quantity of the good sold will typically increase. If a 
distortion exists in the market causing the product in question to be 
sold at a price above the marginal (social) cost of production (e.g., a 
tax, an externality, or a markup enabled by market power), this 
quantity expansion has the effect of reducing deadweight loss in that 
market. In the simple case where there is one good subject to the 
policy and that good has no close substitutes or complements, this 
welfare effect can be easily illustrated as in Figure 1.
[GRAPHIC] [TIFF OMITTED] TR04JA24.001

    The solid line reflects the demand for the good, where some 
quantity is purchased at a market price of p<INF>0</INF> (point A), 
which is higher than marginal costs (MC). Because of this wedge between 
price and marginal costs, there is a reduction in welfare relative to 
the outcome where prices equal marginal costs; this deadweight loss is 
illustrated on the graph by the bordered triangle (ACD). Holding 
everything else constant, when prices fall from p<INF>0</INF> to 
p<INF>1</INF>, this deadweight loss is reduced to some extent. Part of 
this increase in welfare will go to consumers, and part will go to 
producers.
    Imagine that this graph depicts the market for new automobiles. The 
Final Rule will increase price competition, thus reducing market power 
and shifting prices closer to marginal costs in the new automobile 
market. If this market satisfied the criteria for the simple case 
described herein (i.e., no close substitutes or complements), the only 
data we would need to estimate this change in total welfare would be 
the predicted change in price, the predicted change in quantity (which 
can be calculated from an estimate of the slope or elasticity of the 
demand curve for new vehicles), and some information or assumption 
about the shape of the demand curve between points A and B. Of course, 
the new automobile market is closely linked to the used automobile 
market, so this simple picture does not capture the entire story.
    When a good has a close substitute (like used versus new vehicles), 
a price decrease for that good will cause demand for the related good 
to decrease. Also, in the case of automobiles, there is a long-run link 
between the new and

[[Page 680]]

used vehicle markets as a new vehicle purchased today becomes a 
potentially available used vehicle tomorrow. These linkages between the 
markets will dampen the demand response to any given price change in 
the primary market. In practice, this means that our estimates of the 
responsiveness of new vehicle purchases to price changes (i.e., the 
price elasticity of demand for new vehicles) will overstate the change 
in quantity resulting from a change in prices, because such estimates 
typically assume that all other prices remain constant. In addition, if 
there are distortions present in the market for related goods (i.e., 
used vehicles are also sold at a markup over marginal costs) only 
examining the welfare effect in the primary market will understate the 
total welfare effect, as there will be an analogous reduction in 
deadweight loss in the market for the related good. These linkages 
between markets for related goods become difficult to explain 
graphically. However, we have included in the technical appendix an 
algebraic derivation of the total welfare effect in new and used 
vehicle markets resulting from the finalization of the Rule. The 
resulting formula requires estimates of seven parameters in order to 
compute the welfare effect: two ``policy elasticities'' that reflect 
the responsiveness of quantities of new and used vehicles sold to a 
change in prices in the new vehicle market after all adjustments have 
occurred in both markets, two baseline markups that represent the 
differences between prices and marginal costs for new and used 
vehicles, two quantities that reflect the aggregate costs of all new 
and used vehicles sold under the status quo, and the predicted change 
in prices due to the Rule.
4. Estimation
    To obtain ``policy elasticities'' we reference a U.S. Environmental 
Protection Agency report titled ``The Effects of New-Vehicle Price 
Changes on New- and Used-Vehicle Markets and Scrappage'' (``EPA 
Report'').\556\ In this report, the authors ``developed a theoretical 
model of the relationships between new- and used-vehicle markets, 
scrappage, and total vehicle inventory'' that allows for simulation of 
prices and quantities in these markets. The model is calibrated using a 
range of demand elasticity estimates from a review of the relevant 
literature on auto markets. The resulting simulations examine the long-
run ``steady state'' of vehicle inventories and demand, accounting for 
cross-market demand effects as well as the endogenous supply of used 
vehicles resulting from changes in demand for new vehicles in previous 
periods. Importantly, among the outputs of their simulations are the 
``policy price elasticities'' required by our welfare change formula. 
Our base case estimates of deadweight loss reduction use the long-run 
policy price elasticities that result from calibrating the model with 
the EPA Report's intermediate values for the aggregate new vehicle and 
outside option demand elasticities, but we explore sensitivity to other 
calibration scenarios.
---------------------------------------------------------------------------

    \556\ Assmt. & Standards Div., Ofc. of Transp. & Air Quality, 
U.S. Env't Prot. Agency, ``The Effects of New-Vehicle Price Changes 
on New- and Used-Vehicle Markets and Scrappage'' (2021), https://cfpub.epa.gov/si/si_public_file_download.cfm?p_download_id=543273&Lab=OTAQ.
---------------------------------------------------------------------------

    To obtain baseline estimates of new-vehicle markups, we refer to a 
recent paper entitled ``The Evolution of Market Power in the US 
Automobile Industry'' by Paul Grieco, Charles Murry, and Ali 
Yurukoglu.\557\ The authors specify a model of the U.S. new car 
industry to explore trends in concentration and markups. The authors 
find that markups in the industry have been falling over time 
generally, but have been fairly stable since the early 2000s.\558\ As 
our baseline, we use their most recent estimate of industry markups, 
which was 15% in 2018.\559\ While this estimate reflects markups over 
production costs by manufacturers and not markups over wholesale prices 
paid by dealers, it is the wedge between retail price and production 
cost that matters for welfare. As we are unaware of any publicly 
available data measuring used-vehicle markups, we explore two 
alternatives that we believe reflect the limiting cases: (1) used 
vehicles have no markup and (2) used-vehicle markups are the same as 
new-vehicle markups.
---------------------------------------------------------------------------

    \557\ See Paul L. E. Grieco et al., ``The Evolution of Market 
Power in the US Automobile Industry'' (2022), mimeo.
    \558\ Paul L. E. Grieco et al., ``The Evolution of Market Power 
in the US Automobile Industry'' 19 (2022), mimeo.
    \559\ Paul L. E. Grieco et al., ``The Evolution of Market Power 
in the US Automobile Industry'' 19 (2022), mimeo.
---------------------------------------------------------------------------

    We obtain both quantities of new- and used-vehicles sold as well as 
average prices from National Transportation Statistics, Table 1-17. As 
before, we exclude private party, fleet, and wholesale transactions. 
This exclusion is likely to bias our estimate of the total welfare 
effect downward because, unlike the time savings benefits of the Rule 
which may be restricted to dealer-consumer transactions, the price 
effects of the Rule are likely to carry over to private party and fleet 
transactions. Using these aggregate figures along with an estimate of 
baseline markups, we estimate the aggregate cost of new- and used-
vehicles sold in 2019.\560\
---------------------------------------------------------------------------

    \560\ Aggregate cost of good i is equal to (1-[mu]i) x pi x Qi, 
where [mu]i, pi, and Qi are the markup, price, and quantity sold of 
good i, respectively.
---------------------------------------------------------------------------

    Finally, based on the academic literature on search costs in the 
automobile market, the Rule is expected to reduce prices of new 
vehicles by reducing the markup that dealers are able to charge over 
marginal costs. We have identified two papers that empirically estimate 
the effect of price transparency or reduced search frictions on auto 
markups by specifying a structural model of the new-vehicle market, 
estimating the structural parameters, and then conducting 
counterfactual simulations where search frictions are reduced. Murry 
and Zhou (2020) simulate a full information counterfactual in the Ohio 
automobile market where search frictions are eliminated entirely and 
find that markups are reduced by $333.\561\ Moraga-Gonzalez et al. 
(2022) simulate a counterfactual in the Dutch automobile market where 
prices are observed prior to costly consumer search (i.e., visiting 
dealerships) and find that markups are reduced from 40.52% to 
32.59%.\562\ For our base case estimates, we use the smaller Murry and 
Zhou (2020) estimate, primarily because their model is estimated using 
U.S. data consistent with our setting. However, we note that Moraga-
Gonzalez et al. offers evidence to suggest that significantly larger 
changes in markups may result from the Rule.
---------------------------------------------------------------------------

    \561\ Charles Murry & Yiyi Zhou, ``Consumer Search and 
Automobile Dealer Colocation,'' 66 Mgmt. Sci. 1909-1934 (2020), 
https://doi.org/10.1287/mnsc.2019.3307.
    \562\ Jos[eacute] Luis Moraga-Gonzalez et al., ``Consumer Search 
and Prices in the Automobile Market,'' 90 Rev. Econ. Stud. 1394-1440 
(2022), https://doi.org/10.1093/restud/rdac047.
---------------------------------------------------------------------------

    Using these parameters obtained from the literature in combination, 
we implement the formula for the change in total welfare given in the 
technical appendix. For each market--new and used--the formula 
multiplies the policy price elasticity by the percent change in price 
to get the percent change in quantity, and then multiplies this by the 
aggregate markup (as given by the price-cost markup \563\ at baseline 
times the aggregate cost of baseline transactions) to get the 
approximate change in total welfare per year. As an example, our base 
case estimate assumes a policy

[[Page 681]]

price elasticity of new-vehicle demand of -0.25, a policy price 
elasticity of used-vehicle demand (with respect to new-vehicle price) 
of -0.04, and used car markups equal to new car markups (15%), 
resulting in the following calculation:
---------------------------------------------------------------------------

    \563\ The baseline new vehicle markup estimate of 15% is defined 
as the ratio of the price-cost margin to unit price, i.e. (pi-MCi)/
pi, and is sometimes referred to as the Lerner index. With knowledge 
of either price or marginal cost, this can be rearranged to express 
the price-cost markup, i.e. (pi-MCi)/MCi, which is used in the 
formula referenced here.
[GRAPHIC] [TIFF OMITTED] TR04JA24.002

    This annual reduction in deadweight loss is then applied to each 
year of the 10-year analysis period and discounted to the present to 
yield the total benefit. We highlight this base case (bolded in Table 
2.4) but explore several scenarios that vary along two dimensions: (1) 
the ``policy elasticity'' of new- and used-vehicle demand with respect 
to the change in price and (2) the existence of baseline markups in the 
used-vehicle market. In Table 2.4, baseline markups for used vehicles 
vary across columns while the relevant policy price elasticities vary 
across rows: Scenario A corresponds to new-/used-vehicle elasticities 
of -0.14 and 0.01, Scenario B corresponds to new-/used-vehicle 
elasticities of -0.17 and -0.04, Scenario C corresponds to new-/used-
vehicle elasticities of -0.23 and -0.10, and Scenario E corresponds to 
new-/used-vehicle elasticities of -0.39 and -0.12.

                        Table 2.4--Reduction in Deadweight Loss (in Millions), 2024-2033
----------------------------------------------------------------------------------------------------------------
                                             No used-vehicle markups                  Symmetric markups
                                     ---------------------------------------------------------------------------
              Scenario                    Total @ 3%         Total @ 7%         Total @ 3%         Total @ 7%
                                           discount           discount           discount           discount
----------------------------------------------------------------------------------------------------------------
A...................................               $617               $508               $568               $468
B...................................                749                617                945                778
C...................................              1,014                835              1,504              1,238
D...................................              1,102                907              1,298              1,069
E...................................              1,719              1,415              2,307              1,899
----------------------------------------------------------------------------------------------------------------
Note: Benefits have been discounted to the present at both 3% and 7% rates. Scenarios correspond to those in
  Table 7-2 of ``The Effects of New-Vehicle Price Changes on New- and Used-Vehicle Markets and Scrappage.'' New-
  vehicle demand elasticities range from -0.4 (Scenarios A, B, and C) to -0.8 (Scenario D) to -1.27 (Scenario
  E). Outside option elasticities vary from 0 (Scenario A) to -0.05 (Scenarios B and D) to -0.14 (Scenarios C
  and E). New/Used cross-price elasticities are set such that substitution away from new vehicles flows almost
  entirely to used-vehicles, with only small effects on the total number of vehicles. All scenarios hold
  scrappage elasticity fixed at -0.7.

5. Benefits Related to More Transparent Negotiation
    An additional, albeit difficult to quantify, benefit is the 
reduction in discomfort and unpleasantness that consumers associate 
with negotiating motor vehicle transactions under the status quo. 
According to the 2020 Cox Automotive Car Buyer Journey study, filling 
out paperwork, negotiating vehicle price, and dealing with salespeople 
are three of the top four frustrations for consumers at car 
dealerships.\564\ Once the Rule is in effect, all three of these issues 
will be mitigated somewhat by the transparency facilitated by the 
Rule's required disclosures and the time that consumers spend shopping 
and negotiating motor vehicle transactions will be less stressful. 
While we expect an increase in social welfare through this channel, due 
to a lack of data allowing this more qualitative benefit to be 
translated into a quantitative gain, these benefits are left 
unquantified in the analysis.
---------------------------------------------------------------------------

    \564\ 2020 Cox Automotive Car Buyer Journey, supra note 25, at 
37.
---------------------------------------------------------------------------

C. Estimated Costs of Final Rule

    In this section, we describe the costs of the Rule provisions as 
enumerated in SBP VII.A, provide quantitative estimates where possible, 
and describe costs that we can only assess qualitatively. Some industry 
commenters questioned the appropriateness of the data and assumptions 
used in the NPRM, including the discussion of costs in the preliminary 
regulatory analysis. The Commission used a variety of data sources in 
its calculations for the NPRM and in the Rule, including wage data from 
the Bureau of Labor Statistics Occupational Employment Statistics, 
establishment counts from U.S. Census County Business Patterns, 
transaction counts from National Transportation Statistics, and 
breakdowns of motor vehicle transactions (e.g., by financing, GAP 
agreement, F&I add-ons) from numerous industry sources. Where such data 
was not available (e.g., regarding time devoted to compliance tasks), 
the Commission made assumptions based on a review of previous 
regulatory analyses that featured similar requirements, with 
adjustments made based on our understanding of the particulars of motor 
vehicle dealer operations.\565\
---------------------------------------------------------------------------

    \565\ See, e.g., Off. of the Sec'y, Dep't of Transp., Dkt. No. 
DOT-OST-2010-0140, ``Enhancing Airline Passenger Protections II--
Final Regulatory Analysis'' (Apr. 20, 2011), https://www.regulations.gov/document/DOT-OST-2010-0140-2046.
---------------------------------------------------------------------------

    Throughout this section, the cost of employee time is monetized 
using wages obtained from the Bureau of Labor Statistics Industry-
Specific Occupational Employment and Wage Estimates for Automobile 
Dealers.\566\

[[Page 682]]

This is valid under the assumption that the opportunity cost of hours 
spent in compliance activities is hours spent in other productive 
activities, the social value of which is summarized by the employee's 
wage.\567\ To the extent that these activities can be accomplished 
using time during which employees would otherwise be idle under the 
status quo, our estimates will overstate the welfare costs of the Rule.
---------------------------------------------------------------------------

    \566\ Applicable wage rates for the Commission's preliminary 
regulatory analysis, which was published in its NPRM, were based on 
data from the Bureau of Labor Statistics' May 2020 National 
Industry-Specific Occupational Employment and Wage Estimates for 
NAICS industry category 441100--Automobile Dealers, which is 
available at https://www.bls.gov/oes/2020/may/oes_nat.htm. Labor 
rates in the present analysis have been updated based on data from 
the Bureau of Labor Statistics' May 2022 National Industry-Specific 
Occupational Employment and Wage Estimates for NAICS industry 
category 441100--Automobile Dealers, which is available at https://www.bls.gov/oes/current/naics4_441100.htm.
    \567\ This assumption would hold, for example, if both the 
product and labor markets in this industry were competitive.
---------------------------------------------------------------------------

1. Prohibited Misrepresentations
    In its preliminary analysis, the Commission presented two scenarios 
that estimated the costs associated with the Rule provisions 
prohibiting misrepresentations. First, as all the misrepresentations 
prohibited by the Rule are material and therefore deceptive under 
section 5 of the FTC Act, one scenario assumed that all motor vehicle 
dealers are compliant with section 5 under the status quo and will 
therefore conduct no additional review.
    The second scenario allowed for costs incurred by firms because of 
the enhanced penalty associated with violating the Rule (relative to a 
de novo violation of section 5 of the FTC Act) under the assumption 
that dealers may expend additional resources to ensure compliance. This 
``heightened compliance review'' scenario assumed that each of the 
46,525 dealers would have a professional spend 5 additional minutes 
reviewing each public-facing representation (assumed to be 150 per year 
on average). At a labor rate of $26.83 per hour for compliance officers 
employed at auto dealers, this cost was estimated to be $15.6 million 
per year.
    The Commission received comments about the appropriateness of the 
data and assumptions used to estimate the cost of complying with this 
provision of the Rule. The most specific criticism contended that the 
number of documents dealers would need to review would be ``several 
times'' the 150 assumed and that review would require at least 15 
minutes per document because ``dealers typically do not fully control 
the advertising platforms they use given the direct involvement of the 
vehicle OEMs . . . and that of other third parties. Also, many dealers, 
and especially small business dealers do not employ internal compliance 
officers or attorneys who could conduct marketing reviews.'' \568\
---------------------------------------------------------------------------

    \568\ Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8368 at 299-300.
---------------------------------------------------------------------------

    As there is scant empirical evidence provided for these assertions, 
the Commission's preliminary estimates remain unchanged (with the 
exception of updates to more recent data where available). However, we 
have conducted a sensitivity analysis in which all labor hours in the 
base case analysis are increased by an order of magnitude, in keeping 
with the spirit of the comments discussed; see SBP VII.G. As can be 
seen in the results from that analysis, the Rule clearly still 
generates net benefits for society.

 Table 3.1--Estimated Compliance Costs for Prohibited Misrepresentations
------------------------------------------------------------------------
                                                           2024-2033
------------------------------------------------------------------------
Scenario 1--No Review:
    No Cost.....................  ...................                 $0
        Total Cost..............  ...................                 $0
Scenario 2--Heightened
 Compliance Review:
    Number of dealers \a\.......  ...................             47,271
    Number of documents per       ...................                150
     dealer per year.
    Minutes of review per         ...................                  5
     document.
    Cost per hour of review.....  ...................             $31.21
------------------------------------------------------------------------
Total Cost......................  3% discount rate...       $157,310,579
Total Cost......................  7% discount rate...       $129,526,073
------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to
  the present at both 3% and 7% rates.
\a\ County Business Patterns 2021, NAICS Code 4411 (Automobile Dealers,
  used and new).

2. Required Disclosure of Offering Price in Advertisements and in 
Response to Inquiry
    The Rule requires all dealers to disclose an offering price in any 
advertisement that references an individual vehicle or in response to 
any consumer inquiry about an individual vehicle. For this provision, 
the Commission's preliminary analysis presented two cost scenarios for 
dealers when complying with the Rule. First, because dealers already 
price all vehicles in inventory under the status quo, one scenario 
assumed that there would be no additional cost of complying with this 
provision. This scenario assumes that the initial pricing and any 
subsequent re-pricing of vehicles in inventory would take no (or 
minimal) additional time under the Rule.
    As with the prohibition on misrepresentations, the second scenario 
considers the enhanced penalty associated with violating the Rule and 
allows for costs given that dealers may expend additional resources to 
ensure that the prices they disclose conform to the Rule's definition 
of offering price, thus minimizing the risk of penalties should they 
fail to conform to that definition. The latter scenario assumed that, 
in the first year under the Rule, each of the 46,525 dealers would have 
a sales and marketing manager spend 8 hours reviewing their policies 
and procedures for determining the public-facing prices of vehicles in 
inventory. In addition, each dealer would employ a programmer for 8 
hours to update any automated systems that need to be updated in 
accordance with these new policies and procedures. At labor rates of 
$63.93 per hour and $28.90, respectively, this cost was estimated at 
$34.5 million. Both scenarios assume that, once calculated, the time 
required to train employees to include prices in response to consumer 
inquiries about specific vehicles will either be negligible or be 
subsumed by training costs included under other provisions. Finally, 
the time required to deliver the disclosures is also negligible, as 
prices are already typically disclosed in

[[Page 683]]

advertisements and in interactions with consumers under the status quo; 
the Rule just requires the price to conform to a specific definition.
    Some commenters raised issues with the assumptions regarding the 
time and resources necessary to determine compliant prices as well as 
deliver the required disclosures. The comments asserted that vehicle 
prices change frequently in response to market conditions, which would 
make it difficult to ensure that offering prices are accurate. 
Additionally, comments disputed the notion that delivery of the 
information to consumers in accordance with the Rule's provisions would 
not be costly, in terms of employee time and consumer time. One comment 
suggested that ``there would be an average of three Offering Price 
disclosures based there [sic] being an average of three dealer-customer 
discussions regarding three specific motor vehicles, per transaction,'' 
\569\ asserting that the frequency of these disclosures would have 
implications for the cost estimates that had not been considered in the 
preliminary analysis.
---------------------------------------------------------------------------

    \569\ Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8368 at 300.
---------------------------------------------------------------------------

    If indeed the Rule required significant additional employee time 
spent per transaction, that would have implications for the cost 
estimates. However, as previously discussed, it is the understanding of 
the Commission that virtually all dealer-customer discussions regarding 
specific motor vehicles that occur under the status quo already include 
time devoted to a discussion of the vehicle's price. The only change 
under the Rule is that, within that price discussion an offering price 
(as defined by the Rule) must be provided. The cost of determining this 
price is included under the second scenario in our preliminary 
analysis, and sensitivity to the specific assumptions of that scenario 
have been explored in the Appendix. The results from our analysis 
indicate that the Rule generates net benefits for society under a wide 
range of plausible assumptions about the inputs to our cost 
calculations.
    Commenters also raised concerns about the potential for behavioral 
adjustment by dealerships, choosing to refrain from advertising 
individual vehicles or responding to consumer inquiries about specific 
vehicles and thus increasing consumers' costs of search. The 
Commission, however, has not been presented with compelling evidence 
that dealers will forego competition with other dealers on price, 
choosing instead to default to advertising a focal price (such as 
MSRP). Indeed, the Commission's offering price disclosure requirement 
is similar to existing requirements in a number of States, and the 
Commission is not aware of any such behavioral adjustments (e.g., 
eliminating prices from advertisements, refusing to respond to consumer 
inquiries, etc.) having occurred in those States. As a result, the 
Commission's preliminary estimates remain unchanged (with the exception 
of updates to more recent data where available).

  Table 3.2--Estimated Compliance Costs for Offering Price Disclosures
------------------------------------------------------------------------
                                                              2024
------------------------------------------------------------------------
Scenario 1--No Review:
    No Cost..........................................                 $0
                                                      ------------------
        Total Cost...................................                 $0
Scenario 2--Calculation of Offering Price:
    Number of dealers \a\............................             47,271
    Pricing hours per dealer.........................                  8
    Cost per hour of pricing.........................             $80.19
    Programming hours per dealer.....................                  8
    Cost per hour of programming.....................             $40.24
                                                      ------------------
        Total Cost...................................        $45,542,772
------------------------------------------------------------------------
\a\ County Business Patterns 2021, NAICS Code 4411 (Automobile Dealers,
  used and new).

3. Disclosure of Add-On List and Associated Prices
    In the NPRM, the proposed rule would have required all dealers to 
disclose an itemized menu of all optional add-on products and services 
along with prices, or price ranges, on all dealer-operated websites, 
online services, and mobile applications as well as at all dealership 
locations. Various commenters expressed concern that the add-on list 
requirement would have been too complex and potentially confusing, as 
discussed in the paragraph-by-paragraph analysis in SBP III.D.2(b). As 
a result, the Commission has determined not to finalize Sec.  463.4(b) 
of the proposed rule. While the preliminary analysis estimated 
compliance costs between approximately $42 million and $43 million for 
the disclosure of add-on lists and associated prices, those costs are 
not included in the final analysis.
4. Required Disclosure of Total of Payments for Financing/Leasing 
Transactions
    The Rule requires all dealers to disclose, when representing a 
monthly payment, the total of payments for the financing or leasing 
contract. In addition, in any comparison of two payment options with 
different monthly payments, the dealer is required to disclose that the 
option with the lower monthly payment features a higher total of 
payments (if true).
    The Commission's preliminary analysis presented two cost scenarios, 
corresponding to different methods by which dealers may choose to 
comply with the Rule. In the first scenario, we assumed that dealers 
would incur a one-time, upfront cost of both designing the required 
disclosures and informing associates of their obligations to provide 
the disclosures. Importantly, ongoing costs on a per transaction basis 
were assumed to be negligible, reflecting a compliance regime where 
dealers already generate the required information during the normal 
course of business and must only convey it to consumers at an 
appropriate point in the transaction. In the second scenario, we 
assumed that dealers incur an additional ongoing cost per financed or 
leased transaction in order to communicate the required disclosures

[[Page 684]]

to consumers in writing, reflecting a compliance regime where dealers 
find it necessary to maintain a documentary record of compliance with 
the Rule.\570\
---------------------------------------------------------------------------

    \570\ While disclosures of this nature are already required to 
be present in the financing contract by the Truth in Lending Act 
(TILA), the Rule would change the timing of a subset of those 
disclosures. As a result, the dealer may have to develop and deliver 
a separate document in the event that the standard TILA disclosure 
has not yet been generated at the point where disclosure is required 
under the Rule.
---------------------------------------------------------------------------

    The upfront costs (and total costs under Scenario 1) of complying 
with this provision as estimated by the preliminary analysis were 
limited to 8 hours spent by a compliance manager (at a rate of $26.83) 
on the creation of a template disclosure script that contains the 
required information and informing sales staff of their obligations to 
deliver the disclosure at an appropriate time during the transaction. 
This cost was estimated at $10 million.
    The preliminary estimates of additional ongoing costs--as in 
Scenario 2--included 2 minutes of sales associate time per financed/
leased transaction (at a rate of $21.84) spent on the process of 
populating and delivering a printed version of the disclosure, with 
$0.15 per disclosure spent on printing costs. The total additional cost 
under this scenario is estimated at $213.4 to $249.5 million.
    Comments from industry groups asserted that the preliminary 
analysis underestimated training costs and that it would be difficult 
to determine the total of payments for financing prior to knowing the 
details of the transaction. One comment contended that ``these mandates 
. . . necessarily would involve significant annual training 
requirements for new employees given that . . . the average dealer 
experiences an annual sales consultant turnover rate of 67%.'' \571\ 
The comment further asserted that dealers cannot determine the total 
cost of a financing or leasing agreement without knowing the terms for 
which consumers qualify and what terms they want. The comment argued 
that as a result, only the scenario with costs incurred on a per 
transaction basis should be considered. Finally, the comment argued 
that the per-transaction costs in Scenario 2 are too low, both because 
the Commission underestimates the time required to deliver, discuss, 
and review disclosures and because multiple disclosures would have to 
be made per transaction (as terms are changed).
---------------------------------------------------------------------------

    \571\ Comment of Nat'l Auto Dealers Ass'n, Doc. No. FTC-2022-
0046-8368 at 301.
---------------------------------------------------------------------------

    These comments misunderstand the Commission's analysis with respect 
to the costs of complying with this provision. Scenario 1 does not 
anticipate that the dealer presents a consumer with the total of 
payments for a financing or leasing contract at the outset of the 
transaction. It requires only that, at the point where the dealer 
engages in discussions regarding different monthly payments for 
financing or leasing arrangements, the information that must be 
disclosed (i.e., the total of payments and a comparison of these totals 
across differing monthly payments) is already available to the dealer 
under the status quo. The only additional cost incurred per transaction 
would be the delivery of this information to the consumer (the 
determination of which is contemplated in the costs estimated under 
Scenario 1).
    With respect to the comment regarding insufficient allowance for 
training costs in light of employee churn in the industry, the 
Commission has determined this to be a valid critique of the 
preliminary analysis. As a result, the final regulatory analysis 
includes an additional ongoing cost for both Scenarios. This ongoing 
cost includes training for sales staff and budgets 1 hour of training 
for each of the 417,110 sales and related employees across the 
industry, at an (average) cost of $29.43 per hour. The resulting 
additional ongoing costs in both scenarios amounts to $12.3 million per 
year. Further, as discussed in a previous section, the final analysis 
excludes private party, fleet, and wholesale transactions.\572\ The 
remainder of the Commission's preliminary estimates remain unchanged 
(with the exception of updates to more recent data where available). 
Concerns about underestimates of the time required to review 
disclosures on a per-transaction basis are addressed by the 
Commission's sensitivity analyses conducted in the Appendix.
---------------------------------------------------------------------------

    \572\ Without cross-tabulations of fleet sales and sales 
involving financing, we assume that these are independent such that 
the fraction of covered transactions involving financing is equal to 
the fraction of covered transaction times the fraction of financed 
transactions.

                            Table 3.4--Estimated Compliance Costs for Financing Costs
----------------------------------------------------------------------------------------------------------------
                                                                                2024 only          2024-2033
----------------------------------------------------------------------------------------------------------------
Scenario 1--Creation of disclosure and
 training only:
    Upfront costs:
        Number of dealers..................  .............................             47,271  .................
        Compliance manager hours per dealer  .............................                  8  .................
        Cost per hour of disclosure          .............................             $31.21  .................
         creation.
                                            --------------------------------------------------------------------
            Subtotal.......................  .............................        $11,802,623  .................
    Ongoing costs:
        Number of sales and related          .............................  .................            417,110
         employees \a\.
        Training hours per employee........  .............................  .................                  1
        Cost per hour of training..........  .............................  .................             $29.43
----------------------------------------------------------------------------------------------------------------
    Subtotal...............................  3% discount rate.............  .................       $104,712,908
                                             7% discount rate.............  .................        $86,218,307
    Scenario 1--Total Cost.................  3% discount rate.............  .................       $116,515,532
                                             7% discount rate.............  .................        $98,020,931
----------------------------------------------------------------------------------------------------------------
Scenario 2--Disclosures per transaction:
    Covered new vehicle sales per year \b\.  .............................  .................         10,343,319
    % New vehicle sales involving financing  .............................  .................                81%
     \c\.
    Covered used vehicle sales per year....  .............................  .................         21,219,640
    % Used vehicle sales involving           .............................  .................                35%
     financing.
    Covered new vehicle leases per year....  .............................  .................          3,423,294

[[Page 685]]

 
    Total transactions involving monthly     .............................  .................         19,228,256
     payments/financing.
    Disclosure minutes per transaction.....  .............................  .................                  2
    Cost per hour of disclosure............  .............................  .................             $28.41
    Printing cost per disclosure...........  .............................  .................              $0.15
----------------------------------------------------------------------------------------------------------------
    Subtotal...............................  3% discount rate.............  .................       $179,930,957
                                             7% discount rate.............  .................       $148,151,196
    Total Cost.............................  3% discount rate.............  .................       $296,446,489
                                             7% discount rate.............  .................       $246,172,126
----------------------------------------------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates.
\a\ Bureau of Labor Statistics Industry-Specific Occupational Employment and Wage Estimates for NAICS Code
  441100--Automobile Dealers, May 2021.
\b\ For total volume, National Transportation Statistics Table 1-17. For retail/non-fleet fraction, Edmunds
  Automotive Industry Trends 2020 (for new vehicle) and Cox Automotive via Automotive News (for used vehicles).
\c\ Melinda Zabritski, Experian Info. Sols. Inc., ``State of the Automotive Finance Market Q4 2020''.

5. Prohibition on Charging for Add-Ons That Provide No Benefit
    The Rule prohibits dealers from charging for add-on products or 
services from which the targeted consumer would not benefit. Compliance 
with this provision will require dealers to develop policies and 
transaction-level rules about when consumers can be charged for add-on 
products and services. The Rule as proposed in the NPRM also would have 
included additional provisions relating to add-ons that have not been 
finalized. These included a prohibition on charging for optional add-on 
products or services unless dealership employees made a number of 
disclosures at various points before finalizing a transaction. This 
provision would have required each dealer to design form disclosures, 
create a system for populating these forms, train their sales staff on 
the disclosure requirements, and provide the disclosures in writing, 
with the appropriate information filled in, to each consumer prior to 
completing the transaction.
    The Commission's preliminary analysis relating to the cost of 
complying with these disclosure requirements budgeted for 8 hours of 
compliance manager time (at a cost of $26.83 per hour) and 4 hours of 
sales manager time (at a cost of $63.93 per hour) to design disclosure 
forms, and an additional 8 hours of programmer time (at a cost of 
$28.90) to create a system to populate these forms. The preliminary 
analysis also budgeted for 2 minutes of sales associate time (at a rate 
of $21.84 per hour) and $0.11 in printing/electronic delivery costs per 
disclosure, with the number of disclosures determined by the fraction 
of transactions involving optional add-ons and/or financing.
    In response to numerous comments, the Commission has determined not 
to finalize the proposal in Sec.  463.5(b), which would have required 
the delivery of written disclosures and acknowledgement via signature 
of those disclosures by consumers. Various commenters were concerned 
that the add-on disclosures would add documents and time to the 
transaction. In response to these comments, the Commission has 
determined to omit what would have been the only provision 
affirmatively requiring the dealer and consumer to review additional 
documentation during a transaction. As a result, while the preliminary 
analysis estimated compliance costs between approximately $883 million 
and $1 billion for the disclosure of total costs for cash and financed 
transactions with optional add-on products, the cost estimate in the 
final analysis is on the order of one-tenth to one-half of the 
preliminary estimate (depending on the scenario).
    As a result, the Commission has substantially revised the cost 
analysis in this section. First, the Commission assumes that each 
dealer will employ 8 hours of compliance manager time (at a rate of 
$31.21) and 8 hours of sales manager time (at a rate of $80.19) in the 
first year under the Rule, to cull add-ons with no value from their 
offerings and develop policies regarding when certain add-ons may or 
may not be sold. Second, the Commission budgets for 1 hour of training 
per year for each of the 417,110 sales and related employees across the 
industry, to apprise them of these policies and their obligations under 
the Rule. Finally, the Commission includes a second cost scenario in 
which dealers will choose to deliver one itemized disclosure to each 
customer before the finalization of each transaction. Although this is 
not required under the Final Rule, dealers may wish to have 
documentation of compliance with the provisions of the Rule. As in the 
preliminary analysis, the Commission assumes that each dealer will 
employ 8 hours of compliance manager time and 4 hours of sales manager 
time creating this disclosure and 8 hours of programmer time creating a 
system to populate these forms when provided inputs by sales staff. The 
same occupational wage data have been used, but the rates have been 
updated to match the most recent data available. We further assume, as 
in the preliminary analysis, that sales staff will spend 2 minutes per 
disclosure (at a rate of $28.41 per hour) updating, printing, and 
delivering these forms to consumers and that the physical costs of 
delivering the disclosure are roughly $.11 per disclosure.\573\ 
Finally, as discussed in a previous section, the final analysis 
excludes private party, fleet, and wholesale transactions.
---------------------------------------------------------------------------

    \573\ The physical costs are $.15 per paper disclosure and $.02 
per electronic disclosure, assuming that 27% are made 
electronically. This assumption is informed by a consumer survey 
that indicates 73% of consumers with motor vehicles prefer to 
receive registration renewal notices by mail as opposed to 
electronically. See Consumer Action, ``Your opinion wanted: Paper 
vs. electronic bills, statements and other communications'' 4 (2018-
2019), https://www.consumer-action.org/downloads/Consumer_Action_Paper_v_electronic_survey.pdf (showing that 1800 of 
2456 respondents who owned and needed to periodically register a 
motor vehicle preferred mail notices).

[[Page 686]]



                    Table 3.5--Estimated Compliance Costs for Prohibition on Certain Add-Ons
----------------------------------------------------------------------------------------------------------------
                                                                                2024 only          2024-2033
----------------------------------------------------------------------------------------------------------------
Scenario 1--Policies and Training Only:
    Upfront costs:
        Number of dealers..................  .............................             47,271  .................
        Compliance manager hours per dealer  .............................                  8  .................
        Cost per hour of compliance manager  .............................             $31.21  .................
        Sales manager hours per dealer.....  .............................                  8  .................
        Cost per hour of sales manager.....  .............................             $80.19  .................
                                            --------------------------------------------------------------------
            Subtotal.......................  .............................        $42,127,915  .................
    Ongoing costs:
        Number of sales and related          .............................  .................            417,110
         employees.
        Training hours per employee........  .............................  .................                  1
        Cost per hour of training..........  .............................  .................             $29.43
                                            --------------------------------------------------------------------
    Scenario 1--Subtotal...................  3% discount rate.............  .................       $146,840,824
                                             7% discount rate.............  .................       $128,346,223
----------------------------------------------------------------------------------------------------------------
Scenario 2--Disclosure creation and
 delivery:
    Number of dealers......................  .............................             47,271  .................
    Compliance manager hours per dealer....  .............................                  8  .................
    Cost per hour of compliance manager....  .............................             $31.21  .................
    Sales manager hours per dealer.........  .............................                  4  .................
    Cost per hour of sales manager.........  .............................             $80.19  .................
    Programmer hours per dealer............  .............................                  8  .................
    Cost per hour of programmer............  .............................             $40.24  .................
                                            --------------------------------------------------------------------
        Subtotal...........................  .............................        $42,182,750  .................
----------------------------------------------------------------------------------------------------------------
Disclosure delivery (per transaction):
    New vehicle sales per year.............  .............................  .................         10,343,319
    Used vehicle sales per year............  .............................  .................         21,219,640
    Minutes per disclosure.................  .............................  .................                  2
    Cost per hour of disclosure............  .............................  .................             $28.41
    Physical costs per disclosure..........  .............................  .................              $0.11
                                            --------------------------------------------------------------------
        Subtotal...........................  3% discount rate.............  .................       $285,904,302
                                             7% discount rate.............  .................       $235,407,319
        Scenario 2--Total Cost.............  3% discount rate.............  .................       $474,927,875
                                             7% discount rate.............  .................       $405,936,291
----------------------------------------------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates.

6. Requirement To Obtain Express, Informed Consent Before Any Charges
    The Rule requires dealers to obtain express, informed consent 
before charging any consumer for any product or service in association 
with the sale, financing, or lease of a vehicle. Because we presume 
that all dealers who are complying with the law currently have policies 
in place to prevent charges without consent, we assume that there will 
be no additional costs imposed by this provision.
7. Recordkeeping
    The Final Rule requires dealers to retain records of all documents 
pertaining to Rule compliance. These recordkeeping requirements 
include:
    <bullet> Copies of all materially different marketing materials, 
sales scripts, and training materials that discuss sales prices and 
financing or lease terms.
    <bullet> Records demonstrating that all add-ons charged for meet 
the requirements stated in the Rule, including calculations of loan-to-
value ratios in contracts including GAP agreements.
    <bullet> Copies of all purchase orders, financing and lease 
contracts signed by the consumer (whether or not final approval is 
received), and all written communications with any consumer who signs a 
purchase order or financing or lease contract.
    <bullet> Copies of all written consumer complaints, inquiries 
related to add-ons, and inquiries and responses about individual 
vehicles.
    Most of these documents are already produced in the normal course 
of business under the status quo, or the costs of creating them have 
already been accounted for in previous sections. In its preliminary 
analysis, the Commission assumed that each dealer would incur an 
upfront cost, employing 8 hours of programmer time, 5 hours of clerical 
time, 1 hour of sales manager time, and 1 hour of compliance officer 
time, at hourly rates of $28.90, $18.37, $63.93, and $26.83, 
respectively, in order to upgrade their systems and create the 
templates necessary to accommodate retention of all relevant materials. 
The Commission also assumed that each dealer would employ 1 additional 
minute of sales staff time per transaction to populate forms and store 
relevant materials.
    One industry commenter contended that the proposed rule would 
impose substantial and costly recordkeeping mandates, citing primarily 
the various channels through which dealers would be required to capture 
and retain communications. The Commission believes the recordkeeping 
requirements strike an appropriate balance, requiring the retention of 
materials needed to allow effective enforcement while being mindful of 
dealer burden. In addition, the recordkeeping requirements are similar 
to analogous requirements in other Commission disclosure rules, as

[[Page 687]]

tailored to individual industries and markets.\574\
---------------------------------------------------------------------------

    \574\ 16 CFR 310.5 (Telemarketing Sales Rule); 16 CFR 437.7 
(Business Opportunity Rule); 16 CFR 453.6 (Funeral Industry 
Practices Rule); 16 CFR 301.41 (Fur Products Labeling).
---------------------------------------------------------------------------

    As such, the Commission's final analysis retains its preliminary 
estimates--appropriately updated where more recent data were 
available--with a few changes. First, we made adjustments to the cost 
estimates associated with the required loan-to-value calculations for 
all transactions with GAP agreements. Based on a comment from one 
industry group, we revised down the share of covered new and used 
vehicle sales with a GAP agreement to 17%.\575\ As in the preliminary 
analysis, for these transactions sales staff will spend an additional 
minute to generate and store the relevant calculations. As discussed in 
a previous section, the final analysis excludes private party, fleet, 
and wholesale transactions. In addition, the expansion of the volume of 
records that dealers are required to retain and manage will likely 
require investment in additional IT systems and hardware, which was 
left unquantified in the preliminary analysis. After additional 
research, the Commission estimates that each dealer will need to spend 
approximately $300 per year on storage (either on premises or in the 
cloud) to house the records that the Rule requires them to maintain. 
Based on a review of the transaction records we have received from 
dealers through investigations, this amount is likely to be more than 
sufficient for compliance.\576\
---------------------------------------------------------------------------

    \575\ Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-2022-
0046-8368 at 12 n.43 (indicating 15.3% (18.2%) for new (used) 
vehicles). These rates were weighted by transactions counts to 
calculate an overall rate of 17%.
    \576\ Our review of dealer transaction records suggests that a 
typical transaction generates 3.4 MB of data under the status quo. 
Given the average number of transactions per dealer, this suggests 
that storing all these records would require dedicated space of 
roughly 4.2 GB per year. With a two-year retention window, this 
corresponds to 8.4 GB of storage at any given time. We estimate that 
the (annual) amount budgeted here should be sufficient to maintain 
at least 1 TB of storage--either on premises or through a cloud 
storage vendor--which is sufficient for more than 100 times the data 
storage capacity necessary to retain all transaction files generated 
by a typical dealership in a year under the status quo. The 
Commission anticipates that this amount of data storage capacity 
will be more than sufficient to also allow for dealers to keep any 
necessary records of correspondence with consumers who ultimately do 
not complete transactions at the dealership.

                             Table 3.6--Estimated Compliance Costs for Recordkeeping
----------------------------------------------------------------------------------------------------------------
                                                                                2024 only          2024-2033
----------------------------------------------------------------------------------------------------------------
Updating systems:
    Number of dealers......................  .............................             47,271  .................
    Programming hours per dealer...........  .............................                  8  .................
    Cost per hour of programming...........  .............................             $40.24  .................
    Clerical hours per dealer..............  .............................                  5  .................
    Cost per hour of clerical work.........  .............................             $20.16  .................
    Sales manager hours per dealer.........  .............................                  1  .................
    Cost per hour of sales manager review..  .............................             $80.19  .................
    Compliance manager hours per dealer....  .............................                  1  .................
    Cost per hour of compliance review.....  .............................             $31.21  .................
                                            --------------------------------------------------------------------
        Subtotal...........................  .............................        $25,248,387  .................
----------------------------------------------------------------------------------------------------------------
Hardware and Storage (per year):
    Number of dealers......................  .............................  .................             47,271
    Cost of hardware/storage...............  .............................  .................               $300
----------------------------------------------------------------------------------------------------------------
Recordkeeping (per transaction):
    Number of covered motor vehicle sales..  .............................  .................         31,562,959
    % of sales with GAP agreement \a\......  .............................  .................                17%
    Number of motor vehicle sales with GAP   .............................  .................          5,444,502
     agreement.
    Sales staff minutes per transaction....  .............................  .................                  1
    Cost per hour of recordkeeping.........  .............................  .................             $28.41
                                            --------------------------------------------------------------------
        Subtotal...........................  3% discount rate.............  .................       $270,444,391
        Subtotal...........................  7% discount rate.............  .................       $222,677,967
                                            --------------------------------------------------------------------
            Total Cost.....................  3% discount rate.............  .................       $295,692,777
            Total Cost.....................  7% discount rate.............  .................       $247,926,354
----------------------------------------------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to the present at both 3% and 7% rates.
\a\ Comment of Nat'l Auto. Dealers Ass'n, Doc. No. FTC-2022-0046-8368 at 12 n.43.

D. Other Impacts of Final Rule

    As the status quo in this industry features consumer search 
frictions, shrouded prices, deception, and obfuscation, dealers likely 
charge higher prices for a number of products and services than could 
be supported once the Rule is in effect. SBP VII.B discussed the 
Commission's expectation that prices are likely to adjust in response 
to the transparency facilitated by the Rule, and quantified the 
benefits that result when vehicle quantities increase in response to a 
more transparent and less deceptive equilibrium. The price changes in 
the new vehicle market discussed in SBP VII.B will also have the effect 
of transferring $3.4 billion per year from dealers whose conduct under 
the status quo would not have complied with the Rule to consumers. In 
addition, other prices may be impacted by the Rule, such as used 
vehicle prices and add-on prices. As we have insufficient data to 
predict these price effects, neither the transfers associated with 
these potential price changes nor the resulting quantity adjustments 
and deadweight loss reductions are quantified in the current

[[Page 688]]

analysis. Finally, it may be the case that enhanced transparency of the 
Rule leads to fewer of certain types of transactions relative to the 
status quo. Recent evidence suggests that price shrouding of the kind 
that is prevalent in the motor vehicle market results in consumers 
spending more than they would otherwise.\577\ We expect that this 
phenomenon may extend especially to the motor vehicle add-on market, 
where the Commission has compiled substantial evidence that individuals 
frequently inadvertently purchase add-ons that they did not want and 
ultimately will not use.\578\ While much of this effect may ultimately 
be transfers, we reiterate that to the extent they represent transfers 
from dishonest dealers to consumers, this may be considered a benefit 
of the Rule.
---------------------------------------------------------------------------

    \577\ See Tom Blake et al., ``Price Salience and Product 
Choice,'' 40 Mktg. Sci. 619-36 (2021), https://doi.org/10.1287/mksc.2020.1261.
    \578\ See Nat'l Consumer Law Ctr., ``Auto Add-ons Add Up: How 
Dealer Discretion Drives Excessive, Inconsistent, and Discriminatory 
Pricing'' (Oct. 1, 2017), https://www.nclc.org/images/pdf/car_sales/report-auto-add-on.pdf; Consumers for Auto Reliability and Safety, 
Comment Letter on Motor Vehicle Roundtables, Project No. P104811 at 
2-3 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf (citing a U.S. Department of Defense data call summary 
that found that the vast majority of military counselors have 
clients with auto financing problems and cited ``loan packing'' and 
yo-yo financing as the most frequent auto lending abuses affecting 
servicemembers); Adam J. Levitin, ``The Fast and the Usurious: 
Putting the Brakes on Auto Lending Abuses,'' 108 Geo. L.J. 1257, 
1265-66 (2020), https://www.law.georgetown.edu/georgetown-law-journal/wp-content/uploads/sites/26/2020/05/Levitin_The-Fast-and-the-Usurious-Putting-the-Brakes-on-Auto-Lending-Abuses.pdf 
(discussing ``loan packing'' as the sale of add-on products that are 
falsely represented as being required in order to obtain 
financing.); Complaint ]] 12-19, Fed. Trade Comm'n v. Liberty 
Chevrolet, Inc., No. 1:20-cv-03945 (S.D.N.Y. May 21, 2020) (alleging 
deceptive and unauthorized add-on charges in consumers' 
transactions); Complaint ]] 59-64, Fed. Trade. Comm'n v. Universal 
City Nissan, No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging 
deceptive and unauthorized add-on charges in consumers' 
transactions); Complaint ]] 6, 9, TT of Longwood, Inc., No. C-4531 
(F.T.C. July 2, 2015) (alleging misrepresentations regarding prices 
for added features); see also Auto Buyer Study, supra note 25, at 14 
(``Several participants who thought that they had not purchased add-
ons, or that the add-ons were included at no additional charge, were 
surprised to learn, when going through the paperwork, that they had 
in fact paid extra for add-ons. This is consistent with consumers' 
experiencing fatigue during the buying process or confusion with a 
financially complex transaction, but would also be consistent with 
dealer misrepresentations.'').
---------------------------------------------------------------------------

    In addition, deceptive practices by dishonest dealers lead 
consumers to engage with those dealers instead of honest dealerships. 
Once the Rule is in effect, some business that would otherwise have 
gone to dealers using bait-and-switch tactics or deceptive door opening 
advertisements will now go to honest dealerships. Again, assuming that 
the costs of the firms are similar, any one-for-one diversion of sales 
from one set of businesses to another is generally characterized as a 
transfer under OMB guidelines. However, in this case, it would 
represent a transfer from the set of dishonest dealers to honest 
dealers, which may weigh differently if profits from law violations are 
not counted towards social welfare in the regulatory analysis.

E. Conclusion

    The Commission has attempted to catalog and quantify the 
incremental benefits and costs of the provisions included in the Final 
Rule. Extrapolating these benefits over the 10-year assessment period 
and discounting to the present provides an estimate of the present 
value for total benefits and costs of the Rule, with the difference--
net benefits--providing one measure of the value of regulation.
    Using our base case estimates, the present value of quantified 
benefits for consumers from the Rule's requirements over a 10-year 
period using a 7% discount rate is estimated at $13.4 billion. The 
present value of quantified costs for covered motor vehicle dealers of 
complying with the Rule's requirements over a 10-year period using a 7% 
discount rate is estimated at $1.1 billion. This generates an estimate 
of the present value of quantified net benefits equal to $12.3 billion 
using a discount rate of 7%. Using the best (or worst) case assumptions 
discussed in the preceding analysis results in net benefits of $21.2 
billion (or $5.5 billion) using a discount rate of 7%.
    Given that we expect unquantified benefits to outweigh unquantified 
costs for this Rule, this regulatory analysis indicates that adoption 
of the Rule would result in benefits to the public that outweigh the 
costs.

                                                 Present Value of Net Benefits (in Millions), 2024-2033
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Low estimate                      Base case                     High estimate
                                                         -----------------------------------------------------------------------------------------------
                                                            3% Discount     7% Discount     3% Discount     7% Discount     3% Discount     7% Discount
                                                               rate            rate            rate            rate            rate            rate
--------------------------------------------------------------------------------------------------------------------------------------------------------
Benefits:
    Time Savings........................................          $7,463          $6,145         $14,926         $12,290         $24,036         $19,790
    Deadweight Loss Reduction...........................             568             468           1,298           1,069           2,307           1,899
                                                         -----------------------------------------------------------------------------------------------
        Total Benefits..................................           8,031           6,613          16,224          13,359          26,343          21,690
Costs:
    Finance/Lease Total of Payments Disclosure..........             296             246             296             246             117              98
    Offering Price Disclosure...........................              46              46              46              46               0               0
    Prohibition Re Certain Add-ons & Express, Informed               475             406             475             406             147             128
     Consent............................................
    Prohibition on Misrepresentations...................             157             130             157             130               0               0
    Recordkeeping.......................................             296             248             296             248             296             248
                                                         -----------------------------------------------------------------------------------------------
        Total Costs.....................................           1,270           1,075           1,270           1,075             559             474
                                                         -----------------------------------------------------------------------------------------------
        Net Benefits....................................           6,761           5,538          14,954          12,284          25,784          21,216
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: ``Low Estimate'' reflects all lowest benefit estimates and high cost scenarios and ``High Estimate'' reflects all highest benefit estimates and
  low cost scenarios. ``Base Case'' reflects base case benefit estimates and high cost scenarios. Not all impacts can be quantified; estimates only
  reflect quantified costs and benefits.


[[Page 689]]

F. Appendix: Derivation of Deadweight Loss Reduction

    The derivation of the formula for the reduction in deadweight loss 
from the Rule follows from ``Sufficient Statistics Revisited'' by 
Henrik Kleven.\579\ In the source article, the wedge between costs and 
prices is tax rates, but here we consider producer markups; the 
fundamental principles are unchanged. We have a mass of consumers i 
with utility function ui(xiO, xiN, xiU) over new cars, used cars, and 
the numeraire (good 0) who face the following budget constraint:
---------------------------------------------------------------------------

    \579\ See Henrik J. Kleven, ``Sufficient Statistics Revisited.'' 
13 Annual Rev. Econ. 515-38. (2021), https://doi.org/10.1146/annurev-economics-060220-023547.
[GRAPHIC] [TIFF OMITTED] TR04JA24.003

given markups Tij for good j and consumer i and income Yi for consumer 
i. Pre-markup prices are normalized to one so xij is the cost of 
consumer i's purchase of good j. Total profits from the consumption of 
consumer i are Ti = [Sigma]jTijx ij.
    Define a policy to be evaluated as [thetas]. Total welfare is 
defined as:
[GRAPHIC] [TIFF OMITTED] TR04JA24.004

    Here, vi([thetas]) is the indirect utility function for consumer i, 
so the first term is consumer surplus and the second term is producer 
surplus, while [mu] is the value of a dollar of profit. The change in 
welfare from policy [thetas], translated into dollars by dividing by 
[mu], is:
[GRAPHIC] [TIFF OMITTED] TR04JA24.005

    The first term is the total effect on profit from the reform and 
the second term is the ``mechanical'' effect; assuming quantities stay 
constant, how much profits will fall if the policy goes into effect. We 
can rewrite this as follows:
[GRAPHIC] [TIFF OMITTED] TR04JA24.006

    Where
    [GRAPHIC] [TIFF OMITTED] TR04JA24.007
    
is labelled the ``policy elasticity'' for good and consumer with 
respect to policy . We make the following additional assumptions/
simplifications:
    1. The outside good is priced at cost.
    2. All consumers face the same markups so Tik = Tk.
    3. For simplicity, all elasticities are assumed to be cost share-
weighted averages of individual effects, so
[GRAPHIC] [TIFF OMITTED] TR04JA24.008

    As a result, the welfare change from the Auto Rule ([thetas]) is:
    [GRAPHIC] [TIFF OMITTED] TR04JA24.009
    
    Assuming that the Rule affects only markups for new vehicles, we 
can rewrite the ``policy elasticities'' as a product of a price 
elasticity and the elasticity of price with respect to the Rule, as 
follows:
[GRAPHIC] [TIFF OMITTED] TR04JA24.010

where
[GRAPHIC] [TIFF OMITTED] TR04JA24.011

is the long-run ``policy price elasticity'' of demand for good w.r.t. 
the price of good , including the effects that a price change has on 
the prices of related goods. The formula accounts for demand feedback 
effects between the new and used car markets but assumes no dynamics in 
the path from the policy to the long-run steady-state. Computing this 
formula requires estimates of seven parameters: two ``policy price 
elasticities'' that reflect the responsiveness of quantities of new and 
used vehicles sold to a change in prices in the new vehicle market 
after all adjustments have occurred in both markets, two baseline 
markups that represent the differences between prices and marginal 
costs for new/used vehicles, two quantities that reflect the aggregate 
cost of all new/used vehicles sold under the status quo, and the 
predicted change in prices due to the Rule. Calibration of these 
parameters is discussed in the main text.

G. Appendix: Uncertainty Analysis

    While the main text uses alternative assumptions to explore 
sensitivity to a

[[Page 690]]

number of discrete scenarios, in this appendix we allow variation in 
most of the assumptions that underlie our model. This Monte Carlo 
analysis procedure allows us to more fully characterize the uncertainty 
around our central estimate of net benefits, under the assumption that 
our basic model is specified correctly. Most of the assumptions in our 
analysis refer to amounts of time, either amounts of time dealerships 
employees must spend on a compliance task or amounts of time that 
consumers save on various activities related to the automobile shopping 
process. Deviations for these assumptions are centered on the 
parameters used in the main text. Elsewhere, as with assumptions 
regarding fractions or proportions, our base case is often an extreme 
case (i.e., 0 or 1). In these cases, deviations are typically not 
centered on the base case and are allowed to vary across the whole 
range as dictated by the parameter. Still, we can expect the average 
results from this sensitivity analysis to be similar to the result in 
the main text. The object of interest here is the distribution of 
estimates, which indicates the expected variation in net benefits if 
the true parameters deviate from our predictions (with errors of the 
form modeled).
    For most assumptions, we draw from a symmetric, triangular 
distribution around the base case assumption with a specified upper and 
lower bound. In this distribution, the probability of drawing 
particular parameter value increases linearly from the lower bound to 
the base case assumption before decreasing linearly to the upper bound, 
such that the area inscribed by the triangle is equal to 1. We 
emphasize this distribution because it is a parsimonious way to 
incorporate variation in parameter values over a finite range and 
incorporates our preferred estimates as the most likely outcome. For a 
few parameters where we think it is appropriate to de-emphasize the 
main estimate parameter, we draw from a uniform distribution. 
Importantly, all draws are independent; there is no correlation between 
the deviations drawn in any given Monte Carlo trial. An additional 
sensitivity analysis considers a situation where our errors across all 
labor time parameters are correlated; specifically, that all of our 
estimates of the time required for compliance tasks are 1/10th of the 
true time required.
    To incorporate uncertainty in time savings benefits to consumers, 
we allow the time saved by digital consumers to vary by up to ten 
minutes more or less than the main analysis parameters. The share of 
these time savings received by non-digital consumers under the Rule is 
modeled as uniformly distributed between zero (no savings) and one 
(savings equivalent to what digital consumers receive in the status 
quo).

             Table A.1--Alternative Parameters: Benefits of Time Savings for Completed Transactions
----------------------------------------------------------------------------------------------------------------
                                       Base case                              Monte Carlo
----------------------------------------------------------------------------------------------------------------
                                                                               Distribution       Distribution
            Parameter               Parameter value   Modeled distribution     lower bound        upper bound
----------------------------------------------------------------------------------------------------------------
Price Negotiation Time Savings...                 43  Triangular..........                 33                 53
Add-on Negotiation Time Savings..                 33  Triangular..........                 23                 43
Paperwork Time Savings...........                 45  Triangular..........                 35                 55
Trade-In Negotiation Time Savings                 26  Triangular..........                 16                 36
Fraction of Price Time Savings                   1.0  Uniform.............                  0                  1
 Under Rule.
Fraction of Add-on Time Savings                  0.5  Uniform.............                  0                  1
 Under Rule.
Fraction of Paperwork Time                       0.5  Uniform.............                  0                  1
 Savings Under Rule.
Fraction of Trade-In Time Savings                0.0  Uniform.............                  0                  1
 Under Rule.
----------------------------------------------------------------------------------------------------------------

    For the deadweight loss reduction component of benefits, we explore 
sensitivity only to baseline used-vehicle markups, allowing them to 
vary from 0 to the baseline new-vehicle markup of 15%. In the main 
text, we explore a number of scenarios for deadweight loss reduction 
corresponding to greater and lesser demand elasticities as well.
    The following tables describe the distributions we model for cost 
parameters in the simulation exercise. All cost parameters are assumed 
to be drawn from triangular distributions. The tables follow the same 
order as the discussion in the main text.

              Table A.2--Alternative Parameters: Costs of Misrepresentation Prohibition Compliance
----------------------------------------------------------------------------------------------------------------
                                       Base case                              Monte Carlo
----------------------------------------------------------------------------------------------------------------
                                                                               Distribution       Distribution
            Parameter               Parameter value   Modeled distribution     lower bound        upper bound
----------------------------------------------------------------------------------------------------------------
Document Review Minutes..........                  5  Triangular..........                  0                 10
Documents Reviewed...............                150  Triangular..........                100                200
----------------------------------------------------------------------------------------------------------------


                     Table A.3--Alternative Parameters: Costs of Offering Price Disclosures
----------------------------------------------------------------------------------------------------------------
                                       Base case                              Monte Carlo
----------------------------------------------------------------------------------------------------------------
                                                                               Distribution       Distribution
            Parameter               Parameter value   Modeled distribution     lower bound        upper bound
----------------------------------------------------------------------------------------------------------------
Template Creation Sales Manager                    8  Triangular..........                  4                 12
 Hours.
Template Creation Web Developer                    8  Triangular..........                  4                 12
 Hours.
----------------------------------------------------------------------------------------------------------------


[[Page 691]]


                        Table A.5--Alternative Parameters: Costs of Financing Disclosures
----------------------------------------------------------------------------------------------------------------
                                       Base case                              Monte Carlo
----------------------------------------------------------------------------------------------------------------
                                                                               Distribution       Distribution
            Parameter               Parameter value   Modeled distribution     lower bound        upper bound
----------------------------------------------------------------------------------------------------------------
Disclosure Creation Compliance                     8  Triangular..........                  4                 12
 Manager Hours.
Disclosure Training Hours........                  1  Triangular..........                  0                  2
Disclosure Delivery Time Minutes.                  2  Triangular..........                  0                  4
Printing Costs...................               0.15  Triangular..........               0.10               0.20
----------------------------------------------------------------------------------------------------------------


                        Table A.6--Alternative Parameters: Costs of Itemized Disclosures
----------------------------------------------------------------------------------------------------------------
                                       Base case                              Monte Carlo
----------------------------------------------------------------------------------------------------------------
                                                                               Distribution       Distribution
            Parameter               Parameter value   Modeled distribution     lower bound        upper bound
----------------------------------------------------------------------------------------------------------------
Electronic Disclosure Share                     0.27  Triangular..........               0.04               0.50
 (Scenario 2 only).
Upfront Sales Manager Hours                        8  Triangular..........                  4                 12
 (Scenario 1).
Upfront Compliance Manager Hours                   8  Triangular..........                  4                 12
 (Scenario 1).
Disclosure Training Hours                          1  Triangular..........                  0                  2
 (Scenario 1).
Disclosure Creation Sales Manager                  4  Triangular..........                  2                  6
 Hours (Scenario 2 only).
Disclosure Creation Compliance                     8  Triangular..........                  4                 12
 Manager Hours (Scenario 2 only).
Disclosure Creation Web Developer                  8  Triangular..........                  4                 12
 Hours (Scenario 2 only).
Disclosure Delivery Minutes                        2  Triangular..........                  0                  4
 (Scenario 2 only).
Printing Costs (Scenario 2 only).               0.15  Triangular..........               0.10               0.20
Electronic Disclosure Costs                     0.02  Triangular..........                  0               0.04
 (Scenario 2 only).
----------------------------------------------------------------------------------------------------------------


                             Table A.7--Alternative Parameters: Recordkeeping Costs
----------------------------------------------------------------------------------------------------------------
                                       Base case                              Monte Carlo
----------------------------------------------------------------------------------------------------------------
                                                                               Distribution       Distribution
            Parameter               Parameter value   Modeled distribution     lower bound        upper bound
----------------------------------------------------------------------------------------------------------------
GAP Sales Share..................               0.17  Triangular..........               0.07               0.27
GAP Sale Minutes.................                  1  Triangular..........                  0                  2
Upfront Web Developer Hours......                  8  Triangular..........                  4                 12
Upfront Clerical Hours...........                  5  Triangular..........                  2                  8
Upfront Sales Manager Hours......                  1  Triangular..........                  0                  2
Upfront Compliance Manager Hours.                  1  Triangular..........                  0                  2
IT Hardware Costs................                300  Triangular..........                100                500
----------------------------------------------------------------------------------------------------------------

    We simulate 1,000 scenarios drawing from these parameter 
distributions, recording the costs and benefits of each potential 
outcome. The distribution of costs and benefits is plotted in the 
following table for discount rates of 3% and 7%.

[[Page 692]]

[GRAPHIC] [TIFF OMITTED] TR04JA24.012

    Differencing the costs and benefits from each simulation iteration 
yields a distribution of net benefits under the various parameter 
draws. We again plot this distribution under 3% and 7% discount rates.
[GRAPHIC] [TIFF OMITTED] TR04JA24.013

    This exercise finds heterogeneity in net benefits under the 
alternative parameter distributions, but the Rule still yields positive 
net benefits in all simulated outcomes.
    Finally, to examine the sensitivity of the net benefits conclusions 
to the possibility of systematic underestimating of labor costs, we 
calculate costs and benefits in a scenario where all labor costs turn 
out to be ten

[[Page 693]]

times larger than the parameter values in the main text. All non-labor 
hours costs (including benefits hours, wage rates, and prevalence 
counts) are unchanged in this analysis.

  Table A.8--Present Value of Net Benefits (in Millions), Labor Costs x
                              10, 2024-2033
------------------------------------------------------------------------
                                                 Base case
                                 ---------------------------------------
                                   3% Discount rate    7% Discount rate
------------------------------------------------------------------------
Benefits:
    Time savings................             $14,926             $12,290
    Deadweight Loss Reduction...               1,298               1,069
                                 ---------------------------------------
        Total Benefits..........              16,224              13,359
Costs:
    Prohibition on                             1,573               1,295
     Misrepresentations.........
    Offering Price Disclosure...                 455                 455
    Finance/Lease Total of                     2,743               2,279
     Payments Disclosure........
    Prohibition re: Certain Add-               4,471               3,830
     ons & Express, Informed
     Consent....................
    Recordkeeping...............               1,868               1,583
                                 ---------------------------------------
        Total Costs.............              11,111               9,443
                                 ---------------------------------------
        Net Benefits............               5,114               3,916
------------------------------------------------------------------------
Note: ``Base Case'' reflects base case benefit estimates and high cost
  scenarios with ten times the labor costs as in the main analysis. Not
  all impacts can be quantified; estimates only reflect quantified costs
  and benefits.

VIII. Other Matters

    Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.), 
the Office of Information and Regulatory Affairs designated this Rule 
as a ``major rule,'' as defined by 5 U.S.C. 804(2).

List of Subjects in 16 CFR Part 463

    Consumer protection, Motor vehicles, Reporting and recordkeeping 
requirements, Trade practices.

0
For the reasons stated in the preamble, the Federal Trade Commission 
adds part 463 to subchapter D of Title 16 of the Code of Federal 
Regulations to read as follows:

PART 463--COMBATING AUTO RETAIL SCAMS TRADE REGULATION RULE

Sec.
463.1 Authority.
463.2 Definitions.
463.3 Prohibited misrepresentations.
463.4 Disclosure requirements.
463.5 Dealer charges for Add-ons and other items.
463.6 Recordkeeping.
463.7 Waiver not permitted.
463.8 Severability.
463.9 Relation to State laws.

    Authority: 15 U.S.C. 41 et seq.; 12 U.S.C. 5519.


Sec.  463.1  Authority.

    This part is promulgated pursuant to section 1029 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act of 2010, 12 U.S.C. 
5519(d). It is an unfair or deceptive act or practice within the 
meaning of section 5(a)(1) of the Federal Trade Commission Act (15 
U.S.C. 45(a)(1)) to violate any applicable provision of this part, 
directly or indirectly, including the recordkeeping requirements which 
are necessary to prevent such unfair or deceptive acts or practices and 
to enforce this part.


Sec.  463.2  Definitions.

    (a) ``Add-on'' or ``Add-on product(s) or Service(s)'' means any 
product(s) or service(s) not provided to the consumer or installed on 
the Vehicle by the Vehicle manufacturer and for which the Dealer, 
directly or indirectly, charges a consumer in connection with a Vehicle 
sale, lease, or financing transaction.
    (b)-(c) [Reserved]
    (d) ``Clear(ly) and Conspicuous(ly)'' means in a manner that is 
difficult to miss (i.e., easily noticeable) and easily understandable, 
including in all of the following ways:
    (1) In any communication that is solely visual or solely audible, 
the disclosure must be made through the same means through which the 
communication is presented. In any communication made through both 
visual and audible means, such as a television advertisement, the 
disclosure must be presented simultaneously in both the visual and 
audible portions of the communication even if the representation 
requiring the disclosure is made in only one means.
    (2) A visual disclosure, by its size, contrast, location, the 
length of time it appears, and other characteristics, must stand out 
from any accompanying text or other visual elements so that it is 
easily noticed, read, and understood.
    (3) An audible disclosure, including by telephone or streaming 
video, must be delivered in a volume, speed, and cadence sufficient for 
ordinary consumers to easily hear and understand it.
    (4) In any communication using an interactive electronic medium, 
such as the internet or software, the disclosure must be unavoidable.
    (5) The disclosure must use diction and syntax understandable to 
ordinary consumers and must appear in each language in which the 
representation that requires the disclosure appears.
    (6) The disclosure must comply with these requirements in each 
medium through which it is received.
    (7) The disclosure must not be contradicted or mitigated by, or 
inconsistent with, anything else in the communication.
    (e) ``Covered Motor Vehicle'' or ``Vehicle'' means any self-
propelled vehicle designed for transporting persons or property on a 
public street, highway, or road. For purposes of this part, the term 
Covered Motor Vehicle does not include the following:
    (1) Recreational boats and marine equipment;
    (2) Motorcycles, scooters, and electric bicycles;
    (3) Motor homes, recreational vehicle trailers, and slide-in 
campers; or
    (4) Golf carts.
    (f) ``Covered Motor Vehicle Dealer'' or ``Dealer'' means any 
person, including any individual or entity, or resident in the United 
States, or any territory of the United States, that:

[[Page 694]]

    (1) Is licensed by a State, a territory of the United States, or 
the District of Columbia to engage in the sale of Covered Motor 
Vehicles;
    (2) Takes title to, holds an ownership interest in, or takes 
physical custody of Covered Motor Vehicles; and
    (3) Is predominantly engaged in the sale and servicing of Covered 
Motor Vehicles, the leasing and servicing of Covered Motor Vehicles, or 
both.
    (g) ``Express, Informed Consent'' means an affirmative act 
communicating unambiguous assent to be charged, made after receiving 
and in close proximity to a Clear and Conspicuous disclosure, in 
writing, and also orally for in-person transactions, of the following:
    (1) What the charge is for; and
    (2) The amount of the charge, including, if the charge is for a 
product or service, all fees and costs to be charged to the consumer 
over the period of repayment with and without the product or service. 
The following are examples of what does not constitute Express, 
Informed Consent:
    (i) A signed or initialed document, by itself;
    (ii) Prechecked boxes; or
    (iii) An agreement obtained through any practice designed or 
manipulated with the substantial effect of subverting or impairing user 
autonomy, decision-making, or choice.
    (h) ``GAP Agreement'' means an agreement to indemnify a Vehicle 
purchaser or lessee for any of the difference between the actual cash 
value of the Vehicle in the event of an unrecovered theft or total loss 
and the amount owed on the Vehicle pursuant to the terms of a loan, 
lease agreement, or installment sales contract used to purchase or 
lease the Vehicle, or to waive the unpaid difference between money 
received from the purchaser's or lessee's Vehicle insurer and some or 
all of the amount owed on the Vehicle at the time of the unrecovered 
theft or total loss, including products or services otherwise titled 
``Guaranteed Automobile Protection Agreement,'' ``Guaranteed Asset 
Protection Agreement,'' ``GAP insurance,'' or ``GAP Waiver.''
    (i) ``Government Charges'' means all fees or charges imposed by a 
Federal, State, or local government agency, unit, or department, 
including taxes, license and registration costs, inspection or 
certification costs, and any other such fees or charges.
    (j) ``Material'' or ``Materially'' means likely to affect a 
person's choice of, or conduct regarding, goods or services.
    (k) ``Offering Price'' means the full cash price for which a Dealer 
will sell or finance the Vehicle to any consumer, provided that the 
Dealer may exclude only required Government Charges.


Sec.  463.3  Prohibited misrepresentations.

    It is a violation of this part and an unfair or deceptive act or 
practice in violation of section 5 of the Federal Trade Commission Act 
for any Covered Motor Vehicle Dealer to make any misrepresentation, 
expressly or by implication, regarding Material information about the 
following:
    (a) The costs or terms of purchasing, financing, or leasing a 
Vehicle.
    (b) Any costs, limitation, benefit, or any other aspect of an Add-
on Product or Service.
    (c) Whether the terms are, or transaction is, for financing or a 
lease.
    (d) The availability of any rebates or discounts that are factored 
into the advertised price but not available to all consumers.
    (e) The availability of Vehicles at an advertised price.
    (f) Whether any consumer has been or will be preapproved or 
guaranteed for any product, service, or term.
    (g) Any information on or about a consumer's application for 
financing.
    (h) When the transaction is final or binding on all parties.
    (i) Keeping cash down payments or trade-in Vehicles, charging fees, 
or initiating legal process or any action if a transaction is not 
finalized or if the consumer does not wish to engage in a transaction.
    (j) Whether or when a Dealer will pay off some or all of the 
financing or lease on a consumer's trade-in Vehicle.
    (k) Whether consumer reviews or ratings are unbiased, independent, 
or ordinary consumer reviews or ratings of the Dealer or the Dealer's 
products or services.
    (l) Whether the Dealer or any of the Dealer's personnel or products 
or services is or was affiliated with, endorsed or approved by, or 
otherwise associated with the United States government or any Federal, 
State, or local government agency, unit, or department, including the 
United States Department of Defense or its Military Departments.
    (m) Whether consumers have won a prize or sweepstakes.
    (n) Whether, or under what circumstances, a Vehicle may be moved, 
including across State lines or out of the country.
    (o) Whether, or under what circumstances, a Vehicle may be 
repossessed.
    (p) Any of the required disclosures identified in this part.
    (q) The requirements in this section also are prescribed for the 
purpose of preventing the unfair or deceptive acts or practices defined 
in this part, including those in Sec. Sec.  463.4 and 463.5.


Sec.  463.4  Disclosure requirements.

    It is a violation of this part and an unfair or deceptive act or 
practice in violation of section 5 of the Federal Trade Commission Act 
for any Covered Motor Vehicle Dealer to fail to make any disclosure 
required by this section, Clearly and Conspicuously.
    (a) Offering Price. In connection with the sale or financing of 
Vehicles, a Vehicle's Offering Price must be disclosed:
    (1) In any advertisement that references, expressly or by 
implication, a specific Vehicle;
    (2) In any advertisement that represents, expressly or by 
implication, any monetary amount or financing term for any Vehicle; and
    (3) In any communication with a consumer that includes a reference, 
expressly or by implication, regarding a specific Vehicle, or any 
monetary amount or financing term for any Vehicle. With respect to such 
communications:
    (i) The Offering Price for the Vehicle must be disclosed in the 
Dealer's first response regarding that specific Vehicle to the 
consumer; and
    (ii) If the communication or response is in writing, the Offering 
Price must be disclosed in writing. The requirements in this paragraph 
(a) also are prescribed for the purpose of preventing the unfair or 
deceptive acts or practices defined in this part, including those in 
Sec. Sec.  463.3(a) and (b) and 463.5(c).
    (b) [Reserved]
    (c) Add-ons not required. When making any representation, expressly 
or by implication, directly or indirectly, about an Add-on Product or 
Service, the Dealer must disclose that the Add-on is not required and 
the consumer can purchase or lease the Vehicle without the Add-on, if 
true. If the representation is in writing, the disclosure must be in 
writing. The requirements in this paragraph (c) also are prescribed for 
the purpose of preventing the unfair or deceptive acts or practices 
defined in this part, including those in Sec. Sec.  463.3(a) and (b) 
and 463.5(c).
    (d) Total of payments and consideration for a financed or lease 
transaction. (1) When making any representation, expressly or by 
implication, directly or indirectly, about a monthly payment for any 
Vehicle, the Dealer must disclose the total amount the consumer will 
pay to purchase or lease the Vehicle at that monthly payment after 
making all payments as scheduled. If the representation is in

[[Page 695]]

writing, the disclosure must be in writing.
    (2) If the total amount disclosed assumes the consumer will provide 
consideration (for example, in the form of a cash down payment or 
trade-in valuation), the Dealer must disclose the amount of 
consideration to be provided by the consumer. If the representation is 
in writing, the disclosure must be in writing.
    (3) The requirements in this paragraph (d) also are prescribed for 
the purpose of preventing the unfair or deceptive acts or practices 
defined in this part, including those in Sec. Sec.  463.3(a) and 
463.5(c).
    (e) Monthly payments comparison. When making any comparison between 
payment options, expressly or by implication, directly or indirectly, 
that includes discussion of a lower monthly payment, the Dealer must 
disclose that the lower monthly payment will increase the total amount 
the consumer will pay to purchase or lease the Vehicle, if true. If the 
representation is in writing, the disclosure must be in writing. The 
requirements in this paragraph (e) also are prescribed for the purpose 
of preventing the unfair or deceptive acts or practices defined in this 
part, including those in Sec. Sec.  463.3(a) and 463.5(c).


Sec.  463.5  Dealer charges for Add-ons and other items.

    It is a violation of this part and an unfair or deceptive act or 
practice in violation of section 5 of the Federal Trade Commission Act 
for any Covered Motor Vehicle Dealer, in connection with the sale or 
financing of Vehicles, to charge for any of the following.
    (a) Add-ons that provide no benefit. A Dealer may not charge for an 
Add-on Product or Service if the consumer would not benefit from such 
an Add-on Product or Service, including:
    (1) Nitrogen-filled tire-related products or services that contain 
no more nitrogen than naturally exists in the air; or
    (2) Products or services that do not provide coverage for the 
Vehicle, the consumer, or the transaction or that are duplicative of 
warranty coverage for the Vehicle, including a GAP Agreement if the 
consumer's Vehicle or neighborhood is excluded from coverage or the 
loan-to-value ratio would result in the consumer not benefiting 
financially from the product or service.
    (3) The requirements in this paragraph (a) also are prescribed for 
the purpose of preventing the unfair or deceptive acts or practices 
defined in this part, including those in Sec.  463.3(a) and (b) and 
paragraph (c) of this section.
    (b) [Reserved]
    (c) Any item without Express, Informed Consent. A Dealer may not 
charge a consumer for any item unless the Dealer obtains the Express, 
Informed Consent of the consumer for the charge. The requirements in 
this paragraph (c) also are prescribed for the purpose of preventing 
the unfair or deceptive acts or practices defined in this part, 
including those in Sec. Sec.  463.3(a) and (b), 463.4, and paragraph 
(a) of this section.


Sec.  463.6  Recordkeeping.

    (a) Any Covered Motor Vehicle Dealer subject to this part must 
create and retain, for a period of twenty-four months from the date the 
record is created, all records necessary to demonstrate compliance with 
this part, including the following records:
    (1) Copies of all Materially different advertisements, sales 
scripts, training materials, and marketing materials regarding the 
price, financing, or lease of a Vehicle, that the Dealer disseminated 
during the relevant time period; Provided that a typical example of a 
credit or lease advertisement may be retained for advertisements that 
include different Vehicles, or different amounts for the same credit or 
lease terms, where the advertisements are otherwise not Materially 
different;
    (2) [Reserved]
    (3) Copies of all purchase orders; financing and lease documents 
with the Dealer signed by the consumer, whether or not final approval 
is received for a financing or lease transaction; and all written 
communications relating to sales, financing, or leasing between the 
Dealer and any consumer who signs a purchase order or financing or 
lease contract with the Dealer;
    (4) Records demonstrating that Add-ons in consumers' contracts meet 
the requirements of Sec.  463.5, including copies of all service 
contracts, GAP Agreements and calculations of loan-to-value ratios in 
contracts including GAP Agreements; and
    (5) Copies of all written consumer complaints relating to sales, 
financing, or leasing, inquiries related to Add-ons, and inquiries and 
responses about Vehicles referenced in Sec.  463.4.
    (b) Any Dealer subject to this part may keep the records required 
by paragraph (a) of this section in any legible form, and in the same 
manner, format, or place as they may already keep such records in the 
ordinary course of business. Failure to keep all records required under 
paragraph (a) of this section will be a violation of this part.


Sec.  463.7  Waiver not permitted.

    It is a violation of this part for any person to obtain, or attempt 
to obtain, a waiver from any consumer of any protection provided by or 
any right of the consumer under this part.


Sec.  463.8  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Commission's intention that the remaining provisions will continue 
in effect.


Sec.  463.9  Relation to State laws.

    (a) In general. This part will not be construed as superseding, 
altering, or affecting any other State statute, regulation, order, or 
interpretation relating to Covered Motor Vehicle Dealer requirements, 
except to the extent that such statute, regulation, order, or 
interpretation is inconsistent with the provisions of this part, and 
then only to the extent of the inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part.

    By direction of the Commission.
Joel Christie,
Acting Secretary.
[FR Doc. 2023-27997 Filed 12-28-23; 8:45 am]
BILLING CODE P


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